Euro­zone raises 2016 growth out­look, but slashes 2017

Econ­omy faces new chal­lenges due to Brexit, ris­ing in­equal­ity

Kuwait Times - - BUSINESS -

The Euro­pean Union yes­ter­day edged up its euro­zone growth fore­cast for this year but trimmed it for 2017, warn­ing that the econ­omy faced new chal­lenges due to Brexit and ris­ing in­equal­ity.

Brus­sels also nearly halved its eco­nomic growth out­look for Bri­tain it­self next year due to un­cer­tainty over the coun­try’s vote to leave the bloc. Point­ing to in­creased global risks for the 19-coun­try sin­gle cur­rency area as shown by the shock vic­tory of Don­ald Trump in the United States, the Euro­pean Com­mis­sion said eco­nomic growth this year would reach a mod­est 1.7 per­cent.

The com­mis­sion also said that euro­zone growth would slow to 1.5 per­cent growth next year, as the neg­a­tive ef­fects of Bri­tain’s loom­ing di­vorce from the EU be­gan to be felt more deeply.

“In these volatile and un­cer­tain times, no ef­fort must be spared to safe­guard and strengthen this re­cov­ery-and en­sure that all sec­tions of so­ci­ety feel its ben­e­fits,” said EU Eco­nom­ics Af­fairs Com­mis­sioner Pierre Moscovici. Asked about the im­pact of the Trump vote in the US, Moscovici stressed the need to boost eco­nomic re­cov­ery.

“The frus­tra­tion ex­pressed in the US clearly echoes that of Euro­pean voters,” Mosco­vivi said. “Many of our cit­i­zens feel ex­cluded from the eco­nomic re­cov­ery and many of them feel dis­con­nected from govern­ment,” he said. Inflation, long stuck near neg­a­tive ter­ri­tory, would ac­cel­er­ate sharply, the com­mis­sion said, as ris­ing oil prices be­gan to lift con­sumer prices.

The com­mis­sion said inflation in the euro­zone would hit 1.4 per­cent in 2017, up from an ex­pected 0.3 per­cent for 2016. This will come as a re­lief to the Euro­pean Cen­tral Bank which has em­barked on a con­tro­ver­sial stim­u­lus pro­gram to get inflation nearer to the of­fi­cial tar­get of close to 2.0 per­cent. Growth in all 28 EU na­tions would hit 1.8 per­cent in 2016, the com­mis­sion said, with a drop to 1.6 per­cent next year. The EU nearly halved its eco­nomic growth out­look for Bri­tain in 2017 due to the im­pact of the Brexit vote to leave the bloc. It is set to edge up again to 1.2 per­cent in 2018.

Growth in the UK was pro­jected to fall to to 1.0 per­cent from 1.9 per­cent in 2016 “re­flect­ing the im­pact of height­ened un­cer­tainty fol­low­ing the ref­er­en­dum”, the com­mis­sion said.

Bri­tain voted to leave the EU in a ref­er­en­dum on June 23, with the govern­ment ex­pected to trig­ger two years of di­vorce ne­go­ti­a­tions in March of next year. The “UK ‘leave’ vote ... has raised un­cer­tainty and can be seen as an in­di­ca­tor of height­ened pol­icy risks in the cur­rent volatile po­lit­i­cal en­vi­ron­ment,” the com­mis­sion fore­cast said. Greece will be the only euro­zone mem­ber in re­ces­sion this year with a con­trac­tion of 0.3 per­cent as fall­out from debt cri­sis con­tin­ued to af­fect the econ­omy. But the econ­omy would turn around sharply to 2.7 per­cent ex­pan­sion next year, the com­mis­sion said.

Growth in Ire­land and tiny Malta would lead the sin­gle cur­rency zone with a 4.1 per­cent ex­pan­sion this year. The Com­mis­sion fore­casts also cleared the air for France, which will achieve enough growth this year to re­duce its deficit to 2.9 per­cent of GDP, just in­side the EU’s three per­cent limit, ac­cord­ing to the es­ti­mates. — AFP

NEW DELHI: Trav­eller Som­nath Kale (L) holds his son’s hand af­ter ar­riv­ing fol­low­ing a 36-hour train jour­ney from Pune at New Delhi rail­way sta­tion in the In­dian cap­i­tal New Delhi yes­ter­day. — AFP

AUB Chair­man Ha­mad Al-Hu­maidhi

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