The European Commission is expected to revise upwards its growth forecast for Europe on Monday (13 February), showing a marked improvement over its last outlook published hours after Donald Trump was elected US president.
Pierre Moscovici, the EU Commissioner for Economic Affairs, will bring positive news to governments across Europe and the eurozone when he arrives at the press room today.
The UK’s decision to leave the European Union continues to weigh on the continent’s economic perspectives. And the impact the Trump administration will have on the EU’s economy is still unclear.
But despite the political uncertainty, European economies are showing stronger resilience compared to what was expected in early November.
The European Commission now expects GDP growth in the eurozone to reach 1.6% this year, compared with 1.5% three months ago. The figure will be slightly better also for 2018, with an expected growth of 1.8% of GDP, while the autumn forecast predicted 1.7%, according to figures seen by euractiv.com.
Meanwhile, GDP growth in the EU as a whole is expected to reach 1.8% this year, compared to a forecast of 1.6% in November. In spring, before the Brexit vote and the elections in the US took place, the Commission expected a growth rate of 1.9%. For 2018, the Commission maintains a forecast of 1.8%.
In an interview with euractiv.com last month, Moscovici underlined that “the recovery in the EU is now gaining strength”.
Echoing the growing confidence in Europe’s output among global investors, he also pointed out that the global economy was “in better shape” and “resilient enough” to withstand any political decision taken by the new US administration.
Despite the dominant bleak discourse among European decision-makers over the past months, the EU outperformed the US economy in 2016.
Economic growth in the eurozone reached 1.7%, compared with 1.6% in the US.
Besides those political risks, the ongoing difficulties on the Greek bailout programme and the uncertainties surrounding the situation of Italian banks are all weighing on the otherwise positive story of the European recovery.
Not so bright in Spain
But some of the best performing economies in Europe won’t get the positive news they were hoping for.
Despite robust GDP growth figures in 2016 (3.2%), the Commission will not revise upwards its growth forecast for for Spain today. The country’s GDP will grow at 2.3% this year and 2.1% in 2018, according to estimates. The government expected at least 2.5% this year in order to meet the deficit target of 3.1% of GDP.
This weaker growth, compared to Madrid’s forecast, and the lower yield coming from the fiscal measures announced last December are expected to widen the fiscal gap. The Commission predicted in January that the new adjustments could help Spain bring its deficit to 3.3% of GDP in 2017, and 2.8% in 2018. But now the executive expects a deficit of 3.5% this year and 2.9% in 2018.
Still, these figures represent a marked improvement over the autumn forecast, when the executive foresaw a deficit of 3.8% of GDP in 2017 and 3.2% in 2018. According to the fiscal targets agreed with EU institutions, Spain should reach a deficit of 3.1% of GDP this year and 2.2% of GDP the following one.