Eurozone growth to hit fastest in a decade in 2017
The EU sharply raised its eurozone growth forecast for 2017 on Thursday, confident that the economic recovery is gathering pace despite the uncertainties of Brexit.
Britain however saw its outlook for next year slashed, with predictions that it will be hit by a slowdown until at least 2019 when it leaves the bloc.
The 19-country eurozone will grow by 2.2 percent in 2017, its fastest pace in a decade, the European Commission said in its autumn economic forecasts. This was substantially higher than the previous forecast of 1.7 percent and comes just after the EU’s latest GDP growth figures resoundingly beat expectations.
The commission said dark clouds that did exist included the outcome of Brexit talks beween EU and Britain as well as geopolitical tensions between the US and North Korea. “After five years of moderate recovery, European growth has now accelerated,” EU Economic Affairs Commissioner Pierre Moscovici said. “We see good news on many fronts, with more jobs being created, rising investment and strengthening public finances,” he added.
EU officials hope the dynamic economy will help ambitious reform drives by European Commission chief Jean-Claude Juncker and French President Emmanuel Macron to deepen economic integretaion in the eurozone.
In its forecasts, the European Commission said growth in 2018 would edge lower to a still strong 2.1 percent, followed by 1.9 percent in 2019.
France up, Britain down
All eyes were on France, where French President Emmanuel Macron has pushed through controversial reforms to cut spending and loosen rules on hiring and firing in the jobs market. The EU predicted these reforms would benefit the economy, with French growth to hit 1.6 percent this year, up from the earlier 1.4 percent.
The Commission also said that the French deficit this year would fall under the EU’s limit of 3.0 percent of annual GDP. France’s debt was still high at 96.9 percent and would remain at that level through 2019.
The outlook was positive for Spain despite the crisis over Catalonia, with its growth foreacast upgraded to a robust 3.1 percent for this year, leading the eurozone’s major economies. “Our central scenario does not include any major potential economic impact from the events in Catalonia, and I observe that so far market reaction to these events has been relatively limited,” Moscovici said. However the forecast said “the risk exists that future developments could have an impact on economic growth”.
The EU said the 28-nation bloc as a whole would grow by 2.3 percent in 2017, followed by 2.1 percent in 2018. But the report was especially sour for non-euro Britain which saw its growth forecast for 2017 slashed to 1.5 percent. The economy would slow even further to 1.3 percent in 2018, followed by 1.1 percent in 2019. “Growth is still expected to remain subdued over the forecast horizon,” the EU forecast said, adding that “uncertainty continues to weigh on business investment” in Britain.
The positive data for the eurozone come after the European Central Bank (ECB) announced last month it was starting to wind down the massive support it has given the 19-member currency zone to help it through the crises of recent years, in view of the “increasingly robust and broad-based economic expansion”.