Eurozone Expected To Grow At Fastest In Decade As UK Slows

TOP NEWS: Eurozone Expected To Grow At Fastest In Decade As UK Slows

The euro area economy is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2%.

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 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. 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). Nonetheless, this was bigger than the 1.8 percent forecast previously.

As a result United Kingdom economic growth is seen slowing to 1.3% in 2018 before slumping to 1.1% in the year of Brexit.

Moreover, in spite of more social spending due this year's budgetary measures, such as an increase in pensions, current expenditure growth is expected to weaken in 2018.

Revenue growth is supported by the favourable macroeconomic and labour market conditions, high corporate profits, consumer demand and the proceeds from Malta's citizenship scheme.

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.

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The optimism, the commission said, is fueled by increased private consumption, favorable lending conditions, improved economic growth around the world and falling unemployment in Europe. 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".

"Consumption growth is projected to be modest, in line with weak real wage growth, while uncertainty continues to weigh on business investment".

"We see good news on many fronts, with more jobs being created, rising investment and strengthening public finances", said Moscovici, who also highlighted concerns over high debt levels and a lack of wage growth.

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 economies of all member states are expanding and labour markets improving, but wages are rising only slowly. Previously, the European Union had expected 9.4% unemployment this year and 8.9% in 2018.

"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".

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