EU hikes eurozone growth forecasts

European Union flags flutter outside the European Central Bank headquarters in Frankfurt, Germany on Dec 14, 2017.
European Union flags flutter outside the European Central Bank headquarters in Frankfurt, Germany on Dec 14, 2017.PHOTO: REUTERS

BRUSSELS (AFP) - The European Commission raised its growth projections for the eurozone on Wednesday (Feb 7), more confident than ever that the solid economic recovery in Europe will endure through 2019.

The commission, the EU's executive arm, said the 19-country single currency bloc's economy would expand by 2.3 per cent in 2018, up from a previous forecast of 2.1 per cent made in November.

Growth would then continue at a solid pace next year, with the eurozone economy expanding by 2.0 per cent in 2019, instead of the earlier-predicted 1.9 per cent.

"The euro area is enjoying growth rates not seen since before the financial crisis," said EU Economic Affairs Commissioner Pierre Moscovici.

"Unemployment and deficits continue to fall and investment is at last rising in a meaningful way."

All signs are that the European economy, long a global laggard, is now firing on all cylinders.

Official data last week showed that growth in the eurozone shot up in 2017 to 2.5 per cent, with unemployment currently at a nine-year low.

The news was especially positive for France, the eurozone's second biggest economy, which saw its forecast revised sharply higher to 2.0 per cent for this year.

This was up from the 1.7 per cent prediction just three months ago, and will be the first time the country will reach the psychologically important threshold since 2011.

It will also likely mean enough growth to keep France clear of breaching the EU's deficit limit, which is set in terms of the size of the economy.

Brussels said that the EU-27 as a whole, minus exiting Britain, would expand by 2.5 per cent this year and 2.1 per cent in 2019.

Britain meanwhile would expand far below that level, at 1.4 per cent in 2018 and 1.1 per cent in 2019.

However, the commission, which is also leading the EU-Britain divorce talks, markedly increased the UK's growth estimate for 2017 to 1.8 per cent.

In November, the EU said Britain would only reach 1.5 per cent growth.

Powerhouse Germany meanwhile, will remain above the two percent threshold, expanding by 2.3 per cent in 2018 and 2.1 per cent next year.