Eurozone Growth Prediction Increased

Friday, 8 September 2017 8:46


Projections for growth in the Eurozone suggest that it will hit the level seen prior to the Global Financial Crisis for the first time since the storm clouds gathered in 2007. Current ECB projections expect growth in the 19 nations which use the single currency to come in at 2.2% for 2017; this is a 0.3% over previous predictions of 1.9%. Growth within the bloc has been above expectations for the first half of the year, despite on-going uncertainty over the details and impact of Brexit on the remaining EU states. The bloc saw Q1 growth of 0.5% and a Q2 figure of 0.6% expansion.

Inevitably, stronger economic performance will strengthen expectations that the ECB will adjust (or even halt) its €60 billion a month quantitative easing programme. There is speculation that an announcement on this will be made in October, but in the interim it continues unchanged and there has been no change in interest rate policy.

The ECB trimmed its expectations for inflation within the bloc and is currently predicting an annual inflation figure of 1.2% in 2018 and 1.5% the following year. These figures are significantly below the ECB target figure of 2% which would suggest that interest rates are unlikely to rise for the foreseeable future since a rise would further constrict inflation. The relatively weak inflation projections may delay plans to wind down the bank’s QE measures according to some analysts.

The President of the ECB, Mario Draghi, noted: "There was a general recognition of the progress made by the eurozone recovery. It's robust, it's broad-based, and it was recalled that six million jobs were created since 2013."

In Draghi’s opinion, there was still a need for "a very substantial degree of monetary accommodation" going forward to boost Eurozone inflation.

Another factor that the ECB must deal with is the strengthening of the Euro against the Dollar which has gained 13% this year so far. The appreciation is due to concerns over the direction of US economic policy under the Trump administration coupled with the recovery of the Eurozone, of course. Its appreciation against Sterling, again, is due to concerns over the fate of the UK economy during and after the Brexit process and from the uncertainty surrounding it.

Dr. Mike Campbell is a British scientist and freelance writer. Mike got his doctorate in Ghent, Belgium and has worked in Belgium, France, Monaco and Austria since leaving the UK. As a writer, he specialises in business, science, medicine and environmental subjects.

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