Published: Sun, November 12, 2017
Economy | By Melissa Porter

EC lifts Romania's 2017 growth fcast, warns on inconsistent govt policy

However, citing slowing employment growth, lower increases in real disposable incomes and moderating investment growth, the commission said Eurozone growth would moderate slightly over the forecast horizon, to 2.1 percent in 2018.

Growth in the European Union economy as a whole is expected to be at 2.3% in 2017, slightly higher than in the U.S., where growth is expected to reach 2.2%, and Japan, on track to grow at 1.6%.

The Autumn 2017 Economic Forecast put the UK's slow growth down to inflation caused by the collapse in the pound following last year's vote for Brexit.

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

Real GDP is expected to advance by 1.6 pct in 2017 and 2.5 pct in both 2018 and 2019.

The government deficit is moving closer to balance but risks to the fiscal outlook remain, it said. The EC publishes such forecasts three times a year. The gap is seen declining to 0.9% next year, down from the previous estimate of 1.3%, and to 0.8% in 2019. Nearly across the board, private consumer spending is the main driver of growth.

Despite this growth, the Commission states in its report that the Croatian GDP would return to the level before the crisis in two years.

Outside Europe, worldwide tensions as well as adjustments in the Chinese economy or possible protectionist measures by the USA mean that the Commission can not predict whether EU's economic situation will "turn out better or worse than forecast".

However, in view of Malta's openness to trade (nominal exports and imports combined to reach 270% of GDP in 2016) any volatility in Malta's main exporting sectors would have a disproportionately large impact on real GDP growth.

The U.K.'s largely domestic-driven economy has been hit by accelerating inflation in the wake of the Brexit vote a year ago, curtailing consumer spending.

Unit labour costs are projected to rise faster than the euro-area average in 2018 and 2019. "Higher external demand appears to have encouraged European firms to invest more and it has dampened the impact of the euro's appreciation on exports so far".

The country with the lowest growth rate this year will be Italy - 1.5 percent - ahead of an uncertain electoral year. Moreover, there is a risk of a possible under-execution of the public investment budget in 2018, which would hinder overall investment growth as well.

"Investment in construction is projected to contribute substantially to growth in domestic demand, with strong momentum in residential property investment in 2016 expected to continue in the medium term, supported by government policies", the commission said.

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