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