EU lowers growth forecasts on the back of global risks
THE European Union (EU) cut yesterday its eurozone growth forecasts for this year, warning that global risks, including the slowdown in China and the danger of Britain leaving the bloc, were harming the economic recovery.
The European Commission, the EU’s executive arm, also warned that major member states France, Spain and Italy were on course to break the bloc’s rules on public spending.
Warning of increased global risks for the 19-country single currency area as it continues its sluggish recovery, the commission trimmed its forecast for this year to 1.6%, from 1.7%. The European Commission also said eurozone growth would accelerate to 1.8% growth next year, instead of the earlier 1.9% forecast.
“Growth in Europe is holding up despite a more difficult global environment,” said EU economic affairs commissioner Pierre Moscovici. “The recovery in the euro area remains uneven, both between member states and between the weakest and the strongest in society. That is unacceptable and requires determined action from governments, both individually and collectively.”
Eurozone countries are still dealing with the threat of a new crisis in debt-hit Greece, which nearly crashed out of the currency a year ago, as wrangling continues over its huge bail-out.
The EU warned that the “uncertainty surrounding the forecast is extraordinarily high”, suggesting major revisions to the outlook could be expected in the future.
“External risks include the possibility that slower growth in emerging markets, particularly China, could trigger stronger spillovers, or turn out worse than expected,” the European Commission’s forecast said.
The commission also pointed to domestic problems in Europe that posed “considerable risks” including the slow pace of reforms as well as “the uncertainty ahead of the UK’s EU referendum”.
These dangers “could prove to be stronger than expected”, the commission warned.
Britain’s own economy faces risks from the June 23 referendum, with the EU firmly slashing its growth outlook for the UK.
It projected growth of 1.8% this year and 1.9% next year, compared to its forecast in February of 2.1% for both years.
Mr Moscovici said that the forecast was based on Britain remaining in the EU.
The commission said inflation would also continue to be very low, and far off the 2% target of the European Central Bank. The Commission slashed its inflation forecast for the eurozone to 0.2% this year, and 1.4% next year.