A new forecast from the European Commission shows that the EU economy is “on track to grow at its fastest pace in a decade this year.” According the forecast, the Eurozone economy will grow by 2.2% this year, 2.1% next year and 1.9% in 2019. This is a huge improvement on the forecast released in spring, which predicted growth of 1.7%.
Growth has exceeded expectations
The economy in Europe has performed significantly better than was previously expected, which is down to increased private consumption better overall growth globally. Investment in the EU is also rising due to better financial conditions and more stability in European markets. Unemployment has also fallen which has aided the growth, and the labor markets are slowly improving.
According to EU economic affairs commissioner Pierre Moscovici “This is the highest growth rate in 10 years” He also pointed out at a recent press conference that this is first time in ten years that all EU states have seen growth for the year. “We have entered a new phase with a concrete impact on economic indicators,” he said, adding that the effects were now “being felt by citizens”.
Confidence in improving
The improvements seen in the figures are, according to Moscovici, down to “resilient private consumption, stronger growth around the world, and falling unemployment”. Investment in the EU seems to be improving along with confidence in the economy. However, iinternal developments and policies could still affect EU growth.
Spain has seen considerable improvements in its economy with 3.1% growth this year, and should soon be able to exit its deficit procedure which it entered in 2009. The Spanish deficit could fall to 3.1 percent of GDP this year, down from 4.5 percent in 2016, and the Commission expects it will continue to shrink to 2.4 percent in 2018 and 1.7 percent in 2019.
“While market reactions to recent events in Catalonia have remained contained, the risk exists that future developments could have an impact on economic growth,” the Commission noted adding that the scale of the impact the events will have “cannot be anticipated at this stage.”
Unemployment continues to fall
Part of the improvement in growth is being put down to reduced unemployment levels throughout the Eurozone area. Figures are expected to average at 9.1% this year, which is the lowest level since 2009. The report predicts that unemployment will fall further to an estimated 8.5% in 2018, and 7.9% in 2019. “Job creation is expected to moderate, as temporary fiscal incentives fade in some countries and skill shortages emerge in others.”
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