Euro area economy is set to expand this year at a faster pace than previously expected though the main growth driver consumption is seen to slow amid rising inflation, the European Commission said Thursday.
In its Spring Forecast, the European Union executive raised the Eurozone growth forecast for this year to 1.7 percent from 1.6 percent. The prediction for 2018 was retained at 1.8 percent.
The growth projection for the EU was raised to 1.9 percent for both years from 1.8 percent.
Among euro states, Malta was forecast to have the biggest growth rate this year of 4.6 percent, followed by Luxembourg with 4.3 percent and Ireland with 4 percent.
German growth was forecast to slow to 1.6 percent this year, while France's expansion was seen to improve to 1.4 percent. Italy was forecast to maintain its growth momentum at 0.9 percent, but Spain's growth was seen to ease sharply to 2.8 percent.
Greece's growth forecast for this year and next was revised down to 2.1 percent and 2.5 percent, respectively. The reasons for the downgrade was the poor economic performance witnessed in the fourth quarter of 2016 and a delayed return of investor and consumer confidence.
Outside the euro area, the United Kingdom that is set to leave the EU by March 2019 had its growth forecast for this year raised to 1.8 percent from 1.5 percent. The projection for next year was nudged up to 1.3 percent from 1.2 percent. The commission noted that the expected slowdown in consumption is set to influence the country's growth prospects significantly.
Eurozone inflation was forecast to rise from 0.2 percent in 2016 to 1.6 percent in 2017, before returning to 1.3 percent in 2018 as the effect of rising oil prices fades away, the commission said. Earlier, the forecasts were 1.7 percent and 1.4 percent, respectively.
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. In February, the jobless rate for this year was seen at 9.6 percent and that for next year was projected at 9.1 percent.
The uncertainty surrounding the economic outlook remains elevated and risks have become more balanced than in the winter but they remain tilted to the downside, the commission said.
"Europe is entering its fifth consecutive year of growth, supported by accommodative monetary policies, robust business and consumer confidence and improving world trade," EU Economic Affairs Commissioner Pierre Moscovici said.
"It is good news too that the high uncertainty that has characterized the past twelve months may be starting to ease."
That said, the euro area recovery in jobs and investment remains uneven, Moscovici pointed out.
by RTT Staff Writer
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