‘With inflation picking up from low levels, we cannot expect current monetary stimulus to last forever’. – Valdis Dombrovskis, European Commission
On Monday, the European Commission released its latest set of economic forecasts, suggesting that the Brexit vote and elections in Germany and France would have a significant impact on the Euro zone economy. The latest estimates suggest the region’s economy is likely to expand 1.6% in 2017, following the preceding year’s growth pace of 1.7%. However, it is highly expected to regain footing in 2018, growing at an annualized pace of 1.8%. Back in November, the Commission estimated the Euro zone’s economy would grow 1.5% this year and 1.7% in 2018. The region’s largest economy, Germany, is set to expand 1.6% in 2017, down from 1.9% in 2016. Meanwhile, economic growth is expected to climb from 1.2% to 1.4% in France, and keep steady at 0.9% in Italy. The key reason for the upward revisions to the forecasts was stronger than expected performance in the second half of 2016. The Commission also revised up its forecasts for the UK economy, despite the Brexit vote. The British economy is set to expand 1.5% in 2017 and 1.2% in 2018, compared to a 2% growth pace in 2016. In November, it said the economy would expand just 1% in 2017. The 2018-year growth forecast remained unchanged. In 2016, the British economy outperformed all other G7 economies. The Commission also said inflation would hit 1.7% this year but drop to 1.4% in 2018.