Eurozone growing at quickest pace in 10 years, European Union forecast says

Posted November 10, 2017

In the Autumn Forecast, released Thursday, the European Union said the currency bloc will grow 2.2 percent this year instead of prior projection of 1.7 percent.

With current surveys already suggesting that heightened uncertainty is weighing on business investment in the United Kingdom, the EC report forecast investment growth will weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.

In its Autumn Forecast report, the Commission said Ireland's GDP will then slow to 3.9 percent in 2018 and 3.1 percent in 2019. Previously it thought growth would be 1.7 percent.

Political anxiety has also decreased across Europe - as Germany, France and the Netherlands re-elected centrist, pro-EU governments this year. In 2018, the debt is to fall to 130.8 percent and in 2019 to 130.0 percent, the Commission said.

The EC said growth this year is supported by private consumption and rebounding investment.

"GDP growth is projected to remain robust over the forecast horizon but the pace is expected to moderate slightly", the commission says. "The deficit should remain stable, but the structural balance could worsen", said the European Commission.

Greece's economy is growing again, and the recovery is expected to strengthen as investment rebounds and consumption growth rises.

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However, the report noted that while the country is experiencing a very low unemployment rate and increasing skill shortages, wage growth has been limited, due to strong increases in labour supply, on the back of inflows of foreign workers.

Pierre Moscovici, the European Union commissioner for economic and financial affairs, said: "We have entered a new phase of the economic recovery, with stronger growth driven by resilient consumption, the global upswing, loose financing conditions and falling unemployment".

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

"Investment is also picking up amid favourable financing conditions and considerably brightened economic sentiment as uncertainty has faded". 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 labour markets improving, but wages are rising only slowly.

"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". 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.

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.