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1st LD Writethru: EU revises up eurozone economic outlook despite uncertainties

Xinhua, February 13, 2017 Adjust font size:

Economic growth in the 19-country eurozone is expected to speed up due to better-than-expected performance despite uncertainties sparked by Brexit this year and headwinds from its transatlantic ties, it was announced Monday.

The gross domestic product (GDP) across the single currency bloc was projected to stand at 1.6 percent this year and 1.8 percent for 2018, said the European Commission, the bloc's executive arm, in its winter economic forecast.

The readings were slightly revised up from the previous economic forecast published three months ago, in which the eurozone's GDP was predicted to grow by 1.5 percent and 1.7 percent in 2017 and 2018 respectively.

The optimism was generated from "better-than-expected performance in the second half of 2016 and a rather robust start into 2017," said the Commission in a statement.

The wider 28-country European Union (EU) would also follow a similar pattern and was forecast at 1.8 percent this year and next. In November's forecast, the GDP growth was expected to be at 1.6 percent in 2017 and 1.8 percent in 2018.

However, the Commission warned that risks surrounding these projections were "exceptionally large" and, although both upside and downside risks had increased, the overall balance remained tilted to the downside.

The "particularly high uncertainty" was due to the as yet unclarified intentions of the new administration of the United States in key policy areas, as well as the numerous elections to be held in Europe this year and the upcoming Article 50 negotiations with Britain, the Commission said.

Article 50 refers to the formal procedure by which an EU member state notifies the European Council that it intends to leave the block.

The balance of risks remained on the downside although both upside and downside risks have increased, the Commission noted.

Fiscal stimulus in the United States could have a stronger impact on growth than currently expected in the short term while Brexit, as well as Washington's faster monetary tightening stemmed medium-term risks, it added. Endit