MMood­deer­raat­tee rreec­coovveer­ryy eexxppeec­ct­teedd iinn EEu­ur­roo aarreeaa -- IIf­foo,, IINNSSEEEE,, IISSTTAATT

Financial Mirror (Cyprus) - - FRONT PAGE -

Eco­nomic out­put in the euro area is only ex­pected to in­crease mod­er­ately by 0.2% in the fourth quar­ter of 2014 ver­sus the pre­vi­ous quar­ter, ac­cord­ing to a joint an­nounce­ment by Europe’s three lead­ing re­search in­sti­tutes.

Ifo, INSEE and IS­TAT, the in­sti­tutes from Ger­many, France and Italy, also ex­pect an in­crease of just 0.2% for the third quar­ter that has just ended.

“Geopo­lit­i­cal uncer­tain­ties con­tinue to erode the con­fi­dence of eco­nomic play­ers; and growth for 2014 as a whole is ex­pected to to­tal 0.8%. Growth will not ac­cel­er­ate un­til the first quar­ter of 2015, when it is ex­pected to pick up by 0.3% ver­sus the pre­vi­ous quar­ter,” the joint an­nounce­ment said.

The three added that re­cov­ery will prob­a­bly pri­mar­ily be driven by a grad­ual up­turn in do­mes­tic de­mand.

“Both the in­crease in pro­duc­tion and grow­ing in­vest­ment in ex­pan­sion, post­poned due to the fi­nan­cial cri­sis, are ex­pected to stim­u­late in­vest­ment. De­vel­op­ment in pri­vate con­sump­tion, by con­trast, is ex­pected to be weak, since un­em­ploy­ment is only drop­ping slowly. As­sum­ing that the oil price will fluc­tu­ate at around USD 97 per bar­rel and the ex­change rate at around USD 1.28 per euro, the in­fla­tion rate over the next two quarters is only ex­pected to in­crease slightly and will re­main be­low the Euro­pean Cen­tral Bank’s in­fla­tion rate goal of 2%. Risks in­clude a weaker up­turn in in­vest­ment than ex­pected and an in­crease in the pri­vate sav­ings rate. De­mand from emerg­ing economies may be lower than fore­cast, while geopo­lit­i­cal con­flicts could also bur­den the econ­omy to a greater ex­tent.

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