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1st LD Writethru: Eurozone growth forecast revised down to 1.6 pct for 2016

Xinhua, May 3, 2016 Adjust font size:

The gross domestic product (GDP) growth of the 19-country Eurozone was forecast to be slower than previously expected at 1.6 percent for this year, the European Commission said Tuesday.

The reading was 0.1 percentage points less than the bloc's February forecast and slower than the 1.7 percent growth in 2015, said the EU's executive arm the European Commission in its Spring economic forecast.

The single currency bloc's GDP was predicted to expand by 1.8 percent next year, also less than the predicted 1.9 percent three months ago, said the Commission.

In the wider 28-country EU, GDP growth was expected to stand at 1.8 percent in 2016 and 1.9 percent in 2017, both were 0.1 percentage points less below the previous predicts.

Eurozone net exports were expected to remain a drag on growth in 2016 before turning neutral in 2017 while investment was expected to pick up next year to 3.8 percent in both Eurozone and the EU, the Commission said.

The unemployment in the Eurozone will remain high. This year, jobless rate was expected to be at 10.3 percent and then fall to 9.9 percent in 2017.

In the EU as a whole, unemployment was expected to fall from 9.4 percent in 2015 to 8.9 percent in 2016 and 8.5 percent in 2017, the forecast said.

The Eurozone's inflation, which has fallen into negative territory in April, was forecast to stand at 0.2 percent in 2016 and 1.4 percent in 2017, which would be still way off the targeted around 2 percent set by its central bank.

The Commission warned that risks associated with domestic EU developments remained considerable, "as for instance with regards to the pace of implementation of structural reforms and the uncertainty ahead of the UK's EU referendum."

The Commission's Vice President Valdis Dombrovskis urged to step up structural reform efforts to address long-standing problems in many countries, including high levels of public and private debt, vulnerabilities in the financial sector or declining competitiveness.

"A decisive policy action to reform and modernize our economies is the only way to ensure strong and sustainable growth, more jobs and good social conditions for our people," he said. Endit