BRUSSELS – The European Commission published on Wednesday its Winter 2018 European Economic Forecast report whereby this year’s economic growth forecast in both the eurozone and the European Union was revised upwards by two decimal points to 2.3 percent while for 2019 it foresaw a 2 percent growth in gross domestic product in both entities.
The Commission’s Directorate-General for Economic and Financial Affairs macroeconomic forecast reported that the eurozone and EU growth rates surpassed expectations set last year as the transition from economic recovery to expansion continued; the euro area and EU economies were estimated to have grown by 2.4% in 2017, the fastest pace in a decade.
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, and responsible for Financial Stability, Financial Services and Capital Markets Union, said: “The European economy is outperforming expectations and the robust growth is set to continue into next year.”
“The benefits of this growth are felt by all Europeans” making the EU economies more resilient and deepening the Economic and Monetary Union,” he added.
While last year’s overall acceleration of global economic activity and trade benefited the euro area, domestic demand also strengthened, enhanced by above-average business and consumer sentiment and improved labor markets.
Furthermore, Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “Europe’s economy has entered 2018 in robust health. The euro area is enjoying growth rates not seen since before the financial crisis.”
Moscovici added that unemployment and deficits were falling and investment was rising but also warned that the moment “to take the necessary ambitious decisions to strengthen the Economic and Monetary Union” was now.
The Commission report also suggested that growth momentum and robust job creation was expected to continue providing fuel for consumer spending growth. Likewise, investment conditions were expected to remain favorable with both domestic and foreign demand due to strengthening and financing conditions expected to remain loose.
While labor market conditions improved across all Member States, unemployment varied significantly.
According to the report, temporary factors related to energy prices continued playing a major role in inflation developments. After 1.5 percent in 2017, the Harmonised Index of Consumer Prices (HICP), an ECB indicator of inflation and price stability, was forecast to also average 1.5 percent over 2018, rising slightly to 1.6 percent in 2019 within the Eurozone, while in the EU it would reach 1.9 percent this year and 1.8 percent in 2019.
Risks to GDP and inflation outlook remain broadly balanced although risks specific to the Brexit negotiations outcomes remained high, as did downside risks associated with geopolitical tensions and shifts towards more inward-looking and protectionist policies, the report added.