The European Commission’s latest economic forecast has predicted that growth in the Eurozone will be slower than expected with subdued inflation, as well as external and internal risks this year. Gross domestic product of the economic bloc is expected to expand 1.6% this year, down from the 1.7% growth of 2015 and 0.1 percentage points below the February forecast.
Ireland predicted to be Eurozone’s fastest growing economy
There’s good news for Ireland however. The Irish economy will remain the fastest growing in the bloc this year.
Irish GDP growth is forecast to grow 4.9% this year, followed by 3.7% for 2017. Irish GDP grew by 7.8% in 2015.
“Nevertheless, the still high levels of public and private debt, and the uncertainty surrounding external economic and policy developments invite some caution,” the European Commission added
Consumer prices are expected to increase by less than previously estimated – up 0.2% this year. This is 0.3 percentage points below the 0.5% increase forecast. This is an improvement compared to the flat inflation experienced in 2015, but off the European Central Bank’s target of inflation at around to 2%.
Risks to Eurozone
The Commission warned that global factors will affect growth.
“The economic recovery in Europe continues but the global context is less conducive than it was,” Commission Vice President Valdis Dombrovskis said.
External risks to the European economy include the possibility of slow growth in China and other emerging economies, as well as geopolitical tensions and unstable oil prices. The Commission also warned of risks within the EU developments, including the UK’s Brexit referendum in June.
Germany’s GDP is projected to grow 1.6% this year, Italy’s GDP is predicated to be 1.1%, and the forecast for France predicts a 1.3% expansion of the economy.
Greece is expected to be the only euro zone country with GDP projected to decline 0.3% in 2016. However, this is an improvement as the Commission previously predicted the Greek economy to decline by 0.7% this year.