EU econ­omy

The Pak Banker - - FRONT PAGE -

For the last sev­eral years the EU econ­omy has been pass­ing through dif­fi­cult times. Ac­cord­ing to the lat­est re­port, the EU econ­omy is now re­cov­er­ing a bit. A few days ago, the Eu­ro­pean Com­mis­sion raised its growth pro­jec­tions for the euro zone. It seems 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 19- coun­try sin­gle cur­rency bloc's econ­omy would ex­pand by 2.3 per­cent in 2018, up from pre­vi­ous fore­cast of 2.1 per­cent. 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."

Of­fi­cial data 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.

Ac­cord­ing to an es­ti­mate, 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. Pre­vi­ously, the EU said Bri­tain would only reach 1.5 per­cent growth. Pow­er­house Ger­many in the 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 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.

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