European Union raises Turkey's growth forecast

Posted November 10, 2017

Published on Thursday 9 November, it paints an optimistic picture of the euro area economy, which is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2%. GDP growth and inflation are therefore still dependent on policy support.

The threats were evident in the bloc's forecasts for 2018 and 2019, when economic growth is expected to slow down.

Forecasts produced by economists in Brussels said the United Kingdom economy would grow by 1.5% this year rather than the 1.8% pencilled in when the last assessment was made in May.

The projections for 2017 and 2018 were raised from 3.6% and 3.5%, respectively, in the EC's spring economic forecast, released in May.

The EC said growth this year is supported by private consumption and rebounding investment.

The EU predicted these reforms would benefit the economy, with French growth to hit 1.6 percent this year, up from the earlier 1.4 percent.

The government deficit is moving closer to balance but risks to the fiscal outlook remain, it said.

Greece's economy is growing again, and the recovery is expected to strengthen as investment rebounds and consumption growth rises. Employment is projected to increase by 0.7% in 2017.

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.

Pierre Moscovici, the European Union commissioner for economic and financial affairs, said: "We have entered a new phase of the economic recovery, with stronger growth driven by resilient consumption, the global upswing, loose financing conditions and falling unemployment".

Domestic demand was the main driver of growth with both private and public consumption projected to expand strongly in 2017, while last year's "significant contribution" to growth from net exports was set to diminish this year, as imports grew faster than exports, the EC said.

The economies of all member states are expanding and labour markets improving, but wages are rising only slowly.

"Investment is also picking up amid favourable financing conditions and considerably brightened economic sentiment as uncertainty has faded", it said.

The unemployment rate in Croatia will this year be 11.1 percent, falling to 9.2 in 2018, and 7.5 percent in 2019, which should be somewhere near European Union average.

"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".

The labour market performed better than expected, with the unemployment rate dropping to 21 pct in July, down from an annual average of 23.6 pct in 2016.

Once the labour supply increase becomes more moderate, wage growth is forecast to improve.