The European Commission has raised its growth projections for the euro zone The EC is more confident than ever before that the solid economic recovery in Europe will endure through 2019. The commission, the EU's executive arm, said the 19country single currency bloc's economy would expand by 2.3 percent in 2018, up from a previous forecast of 2.1 percent made in November.
Growth would then continue at a solid pace next year, with the euro zone economy expanding by 2.0 percent in 2019, instead of the earlier-predicted 1.9 percent. In the words of EU Economic Affairs Commissioner, "The euro area is enjoying growth rates not seen since before the financial crisis. Unemployment and deficits continue to fall and investment is at last rising in a meaningful way."
There are signs that the European economy, long in trouble, is now looking up. Official data last week showed that growth in the euro zone shot up in 2017 to 2.5 percent, with unemployment currently at a nine-year low. The news was especially positive for France, the euro zone's second biggest economy, which saw its forecast revised sharply higher to 2.0 percent for this year. This was up from the 1.7 percent 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 Britain, would expand by 2.5 percent this year and 2.1 percent in 2019. Britain meanwhile would expand far below that level, at 1.4 percent in 2018 and 1.1 percent 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 percent. In November, the EU said Britain would only reach 1.5 percent growth. Powerhouse Germany meanwhile, will remain above the two percent threshold, expanding by 2.3 percent in 2018 and 2.1 percent next year.
Optimism in the euro zone grew in all surveyed economic sectors, jumping to 16.2 points from 15.4 in September in services, the largest sector in the euro zone. Industry's confidence grew to 7.9 from 6.7 and retailers saw a rise to 5.5 from 3.0. Consumers shared the positive mood, with optimism rising to -1.0 from -1.2, reaching the highest level in 16 years, data recently released showed, confirming a preliminary estimate. However, the euro zone's improving sentiment did not extend to Britain, where confidence among consumers dropped to -5.5 from -5.2. The positive reading for the euro zone was only partly clouded by a drop in inflation expectations among manufacturers to 8.6 from 10.5 three months ago.
That could curb output in coming months. Manufacturing production expectations dipped slightly, while export orders rose only marginally. Inflation expectations among consumers continued to increase, to 14.7 from 14.2 some months ago. Data show that political tensions continue to have little effect on economic sentiment. The figures confirm sound economic growth in the euro zone. The European Union statistics office Eurostat will release preliminary estimates soon on the bloc's gross domestic product.
Generally, economists remain confident that growth will accelerate again in the coming days. But there are downside risks ahead. A rise in global interest rates would put pressure on the most indebted governments, and the ECB has identified Italy and Portugal as countries where interest rates may exceed GDP growth, meaning the debt burden will continue to grow.