Eurozone Expected To Grow At Fastest In Decade As UK Slows

Robyn Ryan
November 10, 2017

Published on Thursday 9 November, it paints an optimistic picture of the euro area economy, which is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2%.

Regarding potential risks for Bulgaria's economy, the EC said that "a slower utilisation of European Union funds could moderate the contribution of investment to growth", while increased tax revenues could create pressure for "additional wage increases, as well as for public investment fully outside the European Union funds programmes". Private consumption is forecast to slow down in 2018 and 2019.Higher increase in imports, driven by strong domestic demand, will lead to a reduction in the current account surplus to 3% of GDP in 2017.

Even before the Brexit separation is sealed, United Kingdom growth is forecast to slow to 1.5% in 2017, with the prediction cut from a previous 1.8%. Economic growth and job creation are robust, investment is picking up and government deficit and debt are gradually decreasing.

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. Private consumption will support favorable labor market trends and record high consumer confidence. It said Italy's GDP is expected to rise 1.5% in 2017, compared to the May forecast of 0.9%, but slow to 1.3% in 2018 (compared to 0.9% predicted previously) and 1% in 2019.

The government deficit is moving closer to balance but risks to the fiscal outlook remain, it said.

"After five years of moderate recovery, European growth has now accelerated", EU Economy Commissioner Pierre Moscovici said.

"While market reactions to recent events in Catalonia have remained contained, the risk exists that future developments could have an impact on economic growth", the Commission noted in its reports, adding that the size of the impact "cannot be anticipated at this stage".

The improving economic outlook reflects a broader global economic upswing that is stoking investments by European Union companies as political and economic uncertainties dim.

The Commission expects a gradual rebound of investment from the second half of the year.

United Kingdom growth slowed down this year - to 1.5 percent from 2.3 percent in 2015 and 1.8 percent in 2016 - because higher prices led to lower consumption. The eurozone is seen expanding to 2.1% in 2018-still up from a previous expectation of 1.8%-with the growth rate dipping to 1.9% in 2019, when Britain will leave the EU.

"Yet challenges remain in the form of high debt levels and subdued wage increases".

"Based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the United Kingdom, growth is still expected to remain subdued over the forecast horizon".

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