EU raises euro zone growth forecasts

Laura Christensen
May 12, 2017

It said Italy's deficit is is set to decline "slightly" to 2.2% of GDP in 2017, compared to 2.4% in 2016 and 2.7% in 2015.

The commission sees the 19-nation economy expanding 1.7 percent this year - up from 1.6 percent forecast in February - and growing 1.8 percent in 2018. "We have spent a lot of energy on this and the climate has changed", said the European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici, commenting on Greece's progress.

"It is good news. that the high uncertainty that has characterized the past twelve months may be starting to ease".

Unemployment in the euro area was projected to drop to 9.4 percent this year and to 8.9 percent next year, thus marking the lowest level since the start of 2009. Moreover, the unemployment rate is expected to be 13.6 percent in 2017 and 14.1 in 2018.

However, the commission said that a recently introduced lower retirement age could put pressure on the workforce.

Risks for euro zone economic growth have decreased from previous forecasts but remain "elevated", the commission said.

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All of which is welcome news for oil traders after last week's plunge in prices that came on the back of worries about rising US, Nigeria and Libya output, and a slowdown in key market China.

Souring the mood, bailed-out Greece, which swung out of recession a year ago but is now at the centre of fresh fears for the eurozone, saw its growth forecast cut sharply to 2.1 per cent in 2017 and 2.5 per cent in 2018.

Growth in the full 28-nation European Union is set to remain constant at 1.9 percent both years.

Brexit remains one of the main risks for the bloc's growth in the coming months, the Commission said. It has also estimated that the public deficit will end the year at 3.2% of GDP. The report also highlights that the recovery is supported by "more balanced" growth than in the years prior to 2008.

Referring to the figures for 2016, when real GDP grew by 5.2 per cent, the commission's spring economic forecast said "some of the impressive headline figures are still heavily distorted by the activities of multinational enterprises in the country".

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