EU Raises Eurozone Growth Forecast

Chelsea West
November 10, 2017

The euro zone economy is expected to grow at its fastest rate in a decade this year, after European Commission forecasts were hiked on Thursday, while investment in United Kingdom seen weakening next year.

In a regular forecast for all European Union economies, the Commission said that Greece would have a primary surplus - the budget balance before debt servicing costs - of 2.0 percent this year.

Eurozone GDP growth has yet to catch up with the 3% expansion in 2007, before the global financial crisis hit.

In its previous forecasts in May, the Commission counted on only a 1.9 percent growth this year and next year.

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

Moreover, in spite of more social spending due this year's budgetary measures, such as an increase in pensions, current expenditure growth is expected to weaken in 2018.

"Economic growth in the United Kingdom has been slowing since the start of the year, as higher consumer prices constrained private consumption growth", the commission report said.

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Even under a no-change scenario, Britain's economic growth would slump to 1.1% in 2019, making it the slowest growing economy after Italy's 1% expansion, the European Union said. The unemployment rate is projected to fall to 6.4% in 2017 and to gradually reach 5.7% in 2019.The Commission's assessment of the general government budget coincides with the fiscal policy objectives set out in the three-year budgetary projections 2018-2020, namely: a balanced budget in 2017 and 2018 and a surplus in 2019.

"The government's fiscal stimulus this year - supported by stronger exports, a significantly depreciated Turkish lira in comparison with last year and a strong boost from public finances and other policy incentives, meant to restore confidence in the Turkish economy", the bloc's economic report said.

Private consumption is expected to recover after a weak performance in the first half of 2017, mainly because more residents were in employment. "The period of unpredictability could be extended if some creditors decide to oppose the outcome of the settlement, which should be reached by mid-2018", said the Commission.

"Investment is also picking up amid favourable financing conditions and considerably brightened economic sentiment as uncertainty has faded", it said. Wage dynamics are still constrained and inflation dampened because of slow productivity growth and a slack in the labour market.

It said Ireland's GDP growth is projected to remain "robust over the forecast horizon" but the pace is expected to "moderate slightly".

The labour market performed better than expected, with the unemployment rate dropping to 21 pct in July, down from an annual average of 23.6 pct in 2016.

Other reports by TheSundaySentinel

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