EU Raises Eurozone Growth Forecast

The Brandenburg Gate reflected by a puddle on Pariser Platz Square in Berlin Germany Tuesday Nov. 7 2017

TOP NEWS: Eurozone Expected To Grow At Fastest In Decade As UK Slows

In a regular forecast for all European Union economies, the Commission said the French budget deficit would fall to 2.9 percent of GDP this year from 3.4 percent in 2016 - making the 2017 deadline set by the European Union for the gap to shrink below 3 percent.

The EU has increased its 2017 growth forecast for Turkey by more than two percentage points, according to the European Economic Forecast Autumn report published on Thursday.

Macron is now pushing through significant labor reforms in France and hopes around those reforms, combined with his repeated calls for enhanced European economic cooperation and consolidation, have helped push growth expectations for France for 2017 up to 1.6 percent from the earlier 1.4 percent.

For the European Union as a whole, the Commission forecast economic growth in 2017 at 1.9 per cent, up from 1.8 per cent in the winter forecast released in February.

But the report was especially sour for non-euro Britain which saw its growth forecast for 2017 slashed to 1.5 percent.

Political anxiety has also decreased across Europe - as Germany, France and the Netherlands re-elected centrist, pro-EU governments this year.

The surplus achieved by the Labour government also features in the report which projects it to be 0.9% by the end of 2017, but is believed to decline to 0.5% in 2018, a figure that will be sustained in 2019.

"After five years of moderate recovery, European growth has now accelerated", said Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs. "The deficit should remain stable, but the structural balance could worsen", said the European Commission.

Private consumption is believed to become the main driver of growth on the back of an increasing population and growing disposable income; with domestic demand playing a secondary role to external demand.

"Investment is also picking up amid favorable financing conditions and considerably brightened economic sentiment as uncertainty has faded", it added. Public finances remain on track to meet the primary surplus targets agreed under the ESM programme. The economies of all Member States are expanding and their labour markets improving, but wages are rising only slowly. Unemployment in the euro area is expected to average 9.1% this year, its lowest level since 2009, as the total number of people employed climbs to a record high.

"Investment in construction is projected to contribute substantially to growth in domestic demand, with the strong momentum in residential property investment in 2016 expected to continue in the medium term, supported by government policies", the commission says.

The EC projects the general government deficit will rise to 2.1% of GDP this year and 2.6% in 2018, before falling to 2.3% in 2019. Core inflation, which excludes energy and unprocessed food prices, by contrast, has been rising but remains subdued, reflecting the impact of a prolonged period of low inflation, weak wage growth as well as remaining labour market slack.

Latest News