Eurozone outlook raises despite ‘high uncertainty’
BRUSSELS - Agence France-PresseThe EU raised on May 11 its eurozone growth forecast, saying the recovery was gaining strength despite the elevated uncertainties of Brexit and the protectionist policies of U.S. President Donald Trump.
The forecast said the positive outlook came in large part thanks to an improving global economy, with the United States and China helping lift Europe.
But the European Commission warned that the “uncertainty surrounding the economic outlook remains elevated.”
The 19-country eurozone will grow by 1.7 percent in 2017 followed by 1.8 percent in 2018, the Commission said in its spring economic forecasts.
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.
Eyes on Trump, Brexit, banks and now France
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 were on France, where pressure is building on incoming president Emmanuel Macron to deliver reforms that will put the brakes on the country’s high public spending.
The Commission said that the French public deficit this year would land safely on the EU’s limit of 3 percent of annual GDP, on the back of overall growth of 1.4 percent.
But the EU warned that the French deficit would bloat after that, putting France at risk of breaking the EU rules again, and in danger of receiving penalties.
Moscovici, who is a former French finance minister, said a “minimal effort” would allow France to “fall under three percent for the long term”.
This was in contrast to European Commission chief Jean-Claude Juncker who on May 8 said the EU had “a real problem with France” on public spending, calling on Macron to deliver reforms.
The news was 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.
The EU 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 Commission said.
The British economy will expand by 1.8 percent in 2017, up from the 1.5 percent forecast three months ago, it predicted.
The Commission said unemployment in the eurozone would continue to fall in 2017, reaching 9.4 percent after ending 2016 at 10 percent.