Euro-zone to grow 1.7% – EU sees drop in unemployment

ATHENS: People walk past a banner calling for general strike and set up on the front of the Finance Ministry building yesterday. Members of the Communist-affiliated union PAME occupied the finance ministry building early on May 11 to draw attention to a May 17 general strike against new pension and tax break cuts promulgated by the government at the behest of Greece’s EU-IMF creditors. — AFP

BRUSSELS: Euro-zone economic growth should grow a bit faster this year than previously believed and the unemployment rate could be the lowest in a decade, the European Commission said yesterday. It also predicted low inflation, a challenge for the European Central Bank which is trying to boost it. The 19-country euro-zone is expected to expand by 1.7 percent this year and 1.8 percent in 2018, the EU executive said, slightly raising its previous estimate for euro-zone growth of 1.6 percent this year, while leaving unchanged the 2018 forecast. The projected growth for 2017, however, remains lower than 2016 when it was 1.8 percent, and further below the 2.0 percent post-crisis high reached in 2015.

The Commission’s forecasts, published three times a year, predict all euro-zone countries will grow this year and next, with Germany, the bloc’s largest economy, accelerating to 1.9 percent in 2018, and Spain and Portugal expanding much more than previously expected. “Europe is entering its fifth consecutive year of growth,” EU Economics Commissioner Pierre Moscovici said. “It is good news too that the high uncertainty that has characterized the past 12 months may be starting to ease,” he said, noting that far-right nationalism “was defeated,” a reference to far-right candidate Marine Le Pen’s loss at last week’s French presidential elections.

In a further sign of a healthier economy, euro-zone unemployment is expected to go down to 9.4 percent this year from 10.0 percent in 2016, before falling further in 2018 to 8.9 percent, a bigger drop than previously estimated. If confirmed, the 2018 figure would be the lowest since the beginning of 2009, although the rate of people without jobs will remain well above the average in Italy, Spain, Cyprus and Greece, where is projected at 21.6 percent in 2018. Inflation is forecast to slow to 1.3 percent next year from a downwardly revised 1.6 percent this year, the Commission said, predicting a lower inflation than European Central Bank’s estimates of a 1.7 percent rate this year.

The risks
Risks for euro-zone economic growth have decreased from previous forecasts but remain “elevated”, the commission said. Greece’s growth was cut to 2.1 percent this year from the 2.7 percent forecast three months ago, because of uncertainty caused by delays in its bailout program, Moscovici said. GDP growth in Greece is also set to shrink to 2.5 percent from previously estimated 3.1 percent in 2018.

Outside the euro-zone, the Commission revised upward its forecast of Britain’s growth to 1.8 percent this year, from a previously estimated 1.5 percent, and to 1.3 percent in 2018 from 1.2 percent, in a sign that the British economy will be hit less than expected by Britain’s decision to leave the EU. Britain’s growth has however slowed down from 2.2 percent in 2015, and domestic demand is expected to weaken as inflation is projected to reach 2.6 percent this year and next, above Bank of England’s target of 2 percent. Brexit remains one of the main risks for the bloc’s growth in the coming months, the Commission said. The state of public finances in euro-zone countries is generally improving, as the Commission expects debts and deficits to go down as a proportion of the bloc’s gross domestic product (GDP), but problems remain in some countries. — Reuters

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