EU hikes growth outlook, but warns of risks

Deutsche Welle
4 Min Read

The European Union has increased its forecast for economic growth in the 28-nation bloc, saying the recovery was gaining strength despite the elevated uncertainties of Brexit and protectionist trade policies.The European Commission’s upward revision of growth on Thursday came largely as a result of an improving global economy, with the United States and China helping lift Europe.

According to the EU executive’s latest estimate, the 19-nation eurozone economy will expand by 1.7 percent in 2017, to be followed by 1.8 percent in 2018. That is compared with estimates made in February of 1.6 percent and 1.8 percent, respectively.

“It is good news … that the high uncertainty that has characterized the past twelve months may be starting to ease. But the euro area recovery in jobs and investment remains uneven,” EU Economy Commissioner Pierre Moscovici said.

The protectionist stance on world trade by the Trump administration, Britain’s divorce from the European Union, and the fragility of European banks could all negatively impact the future of the economy, the Commission said.

All eyes on France

In its spring economic forecasts, Brussels also laid out the scale of the task facing new French president Emmanuel Macron to balanceFrance’s troublesome public finances as it warned that Paris’s efforts to rein in spending were having less effect than previously thought.

The European Commission said that the French budget deficit would land safely on the EU’s limit of three percent of annual gross domestic product (GDP) before rising to 3.2 per cent in 2018. However, it had previously predicted a deficit of 2.9 percent this year, and 3.1 per cent next year.

Brussels said that the worsening numbers reflected lower than expected tax and social security receipts by the state, and higher spending on education, security and civil servant salaries. The commission also warned that rising inflation would make it harder for the French government to comply with domestic rules that cap state spending, and that this “represents a risk to the forecast.”

Mixed picture

The forecast was more positive for Spain which saw its growth target upgraded sharply and confirming a turnaround from the eurozone crisis when the economy crumbled due to a real estate crash.

Growth in Spain would lead the eurozone main economies with 2.8 percent in 2017, a half point increase over the previous forecasts, the EU said.

Souring the mood, bailed-out Greece, which swung out of recession last year, saw its growth forecast cut sharply to 2.1 percent in 2017 and 2.5 percent in 2018.

Regarding the wider European Union, Brussels said the 28-nation bloc as a whole would grow by 1.9 percent in both 2017 and 2018. The news was especially positive for non-euro Britain which would continue growing healthily despite the unknowns of Brexit.

The British economy is set to expand by 1.8 percent in 2017, up from the 1.5 percent forecast three months ago. The Commission also noted that unemployment in the eurozone would continue to fall in 2017, reaching 9.4 percent after ending 2016 at 10 percent.

uhe/kd (Reuters, AFP, dpa)

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