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

Tammy Harvey
November 10, 2017

The 19-member eurozone is expected to grow at its fastest pace in a decade this year, with gross domestic product growth beating forecasts and projected to reach 2.2%, well outpacing the United Kingdom, according to a European Commission report released on Thursday.

In its half-yearly health check, the commission sharply cut its forecast for United Kingdom growth this year and said it was likely to continue struggling in 2018 and 2019 even on the assumption that trade would not be disrupted by its departure from the EU.

The European Commission announced on Thursday it will surpass economic growth expectations for this year, and predicted robust growth in 2018.

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

Malta's treal GDP growth could be pushed by the faster completion of infrastructure projects, as well as by the potential relocation of financial services operators to Malta due to Brexit.

GDP is forecast to grow by 3.5% in 2018, with a more balanced, and broad-based composition.

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

The European Commission forecasts that the Croatian economy will grow this year more than previously expected, but there are still risks associated with the restructuring of Agrokor. "The deficit should remain stable, but the structural balance could worsen", said the European Commission.

"The European economy has performed significantly better than expected this year, propelled by resilient private consumption, stronger growth around the world, and falling unemployment", it said. The economies of all Member States are expanding and their labour markets improving, but wages are rising only slowly.

Greece's economy is growing again, and the recovery is expected to strengthen as investment rebounds and consumption growth rises. The Commissioner added that the recovery in the eurozone is low by historical standards and was "atypical given its dependence on policy support, the continuing presence of fiscal and financial fragilities stemming from the crisis and the relatively subdued domestic demand compared to past recoveries".

The improving economic outlook reflects a broader global economic upswing that is stoking investments by European Union companies as political and economic uncertainties dim. Public finances remain on track to meet the primary surplus targets agreed under the ESM programme.

But conditions remain favourable and the latest indicators point to an increasing momentum in the second half of the year, according to the report.

Despite the pick up in growth, Europe's unemployment rate is expected to be 8.5% next year - double the rate in the UK.

The EC warned that Hungary's labor market is becoming "increasingly tight" and said price pressures are expected to grow over the forecast horizon.

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