European Commission raises GDP growth forecasts

European Commission raises GDP growth forecasts

The European Commission has raised its 2017 growth forecast for the eurozone and expects the 19-country bloc to grow by 2.2 percent this year - its fastest pace in a decade.

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.

Macron is now pushing through significant labor reforms in France and hopes around those reforms, combined with his repeated calls for enhanced European economic cooperation and consolidation, have helped push growth expectations for France for 2017 up to 1.6 percent from the earlier 1.4 percent. Under a no-policy-change assumption, the euro area general government deficit-to-GDP ratio is expected to fall to 0.8% in 2019 (1.1% in 2017 and 0.9% in 2018), while the debt-to-GDP ratio is forecast to decline to 85.2% (89.3% in 2017 and 87.2% in 2018).

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

The EC also forecast 3.8 per cent growth for Bulgaria in 2018 (up from 2.8 per cent in the spring forecast) and 3.6 per cent in 2019. The EU economy as a whole is also set to beat expectations with robust growth of 2.3% this year (up from 1.9% in spring). "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", the Commission said in a statement.

Irish growth is close to the top of the European Union league with only Malta (5.6 per cent) and Romania (5.7 per cent) growing faster this year. The labour market is recovering fast and unemployment is expected to drop further, although average wages may increase only gradually. "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. The economies of all Member States are expanding and their labour markets improving, but wages are rising only slowly.

The delay in closing the second review on the programme, earlier this year, is a "major explanation", Moscovici said, as consumption and investment were "hit more than we had expected" by uncertainty over negotiations between Athens and its creditors.

However, overall current revenue growth is predicted to slow down next year, due to expected lower income from the citizenship scheme.

"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".

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

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