Finance

European Union raises growth forecast for eurozone to decade high

European Union raises growth forecast for eurozone to decade high

The Commission also raised its growth forecast for next year to 2.1 percent from 1.8 percent.

The Commission also forecast that Greek public debt, the highest in the European Union, would fall rapidly over the next two years to 170.1 percent of GDP in 2019 from 179.6 expected this year. The bloc also cut its United Kingdom 2017 economic growth forecast to 1.5% from 1.8% while keeping it steady at 1.3% for next year.

Political anxiety has also decreased across Europe - as Germany, France and the Netherlands re-elected centrist, pro-EU governments this year.

The main reasons for this are positive macroeconomic and labour market conditions, high consumer demand and corporate profits, and money earned through Malta's citizenship scheme.

Come 2018, there is expected to be a slow-down to 4.9% in real GDP growth, with private consumption expected to become the principle factor behind the growth, based on an increasing population and higher disposable income. "The deficit should remain stable, but the structural balance could worsen", said the European Commission.

Tax revenues in 2018 are predicted to continue growing due strong to real GDP growth, despite a reduction in taxation.

"The government's fiscal stimulus this year - supported by stronger exports, a significantly depreciated Turkish lira in comparison with last year and a strong boost from public finances and other policy incentives, meant to restore confidence in the Turkish economy", the bloc's economic report said.

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Wage growth grew moderately for the first half of 2017, even though the unemployment rate was very low, and skill shortages increased.

The surplus is expected to decline to 0.5% in 2018, once the 2018 budget measures are introduced, but should remain stable at the same figure in 2019, under a no-policy-change assumption.

A favourable relocation of financial services operators linked to the process of the United Kingdom leaving the European Union could also affect GDP growth, particularly in 2019.

The commissioner for economic and financial affairs, Pierre Moscovici, said at the report's launch here that: "After five years of moderate recovery, European growth has now accelerated".

While recovery has taken place for 18 uninterrupted quarters, it remains incomplete and atypical, because of its dependence on policy support, the continuing presence of fiscal and financial fragilities stemming from the crisis, and the subdued strength of domestic demand compared to previous recoveries.

The EC projects the general government deficit will rise to 2.1% of GDP this year and 2.6% in 2018, before falling to 2.3% in 2019.

"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". Unemployment in the euro area is expected to average 9.1% this year, its lowest level since 2009, as the total number of people employed climbs to a record high.

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