EC improves Romania's economic growth estimate for 2017 to 4.4%

The new USA administration's policies and the United Kingdom's impending departure from the European Union are the two main risks weighing down on the upturn in Europe's economy, the European Commission's Winter Forecast warned on Monday.

With domestic demand responsible for the bulk of the growth in 2016, contributing an estimated 2.1 percentage points to real GDP growth, this year's figures are expected to be boosted by higher investment, which is expected to grow by 3.2 per cent in 2017, the EC said.

In its winter forecast, the Commission forecasts eurozone GDP growth at 1.6% in 2017 and 1.8% in 2018 (revised upwards from 1.5% and 1.7% respectively in the Autumn forecast).

For the first time in ten years all the countries in the European Union are expected to experience growth throughout the forecast period between 2016-2018, according to the report.

The new forecast means the commission still expects growth in the eurozone to slow this year, from 1.7% in 2016. The recent growth momentum is expected to largely continue in the first quarter, but ease notably thereafter mainly due to an expected slowdown in private consumption growth.

"The balance of risks remains on the downside although both upside and downside risks have increased".

He admitted that Trump's expected stimulus package would boost global GDP "more than expected", but he pointed out that in the medium term, "shifting U.S. position on trade policy may damage worldwide trade" and that a "fast rise in interest rates and a stronger than expected dollar could hurt emerging economies". However, the economic growth estimate for 2016 has been reduced from 5.2% to 4.9%.

British Prime Minister Theresa May, who is expected to start the divorce proceeding with the European Union before the end of March, has said she wants to guarantee the rights of European Union citizens who are already living in Britain. The deficit is seen to rise to 2.5% on an assumption of no policy change in 2018. Over the short term, planned stimulus measures to be introduced by the new administration in the United States should provide a boost to the European economy.

After the referendum, the BoE cut interest rates to a new record low of 0.25 percent and expanded its asset purchase programme.

This contrasts with an expected global expansion of 3.2 percent last year, 3.7 percent this year and 3.9 next year.

In its winter forecast the commission warned that risks had increased over the past year, with Brexit and proposed USA tax and trade policies among the main concerns from an Irish perspective.

  • Leroy Wright