PIGS threaten EU’s growth prospects, Commission warns

• Portugal

GDP is expected to expand by 1.5% in 2015 and pick up slightly to 1.6% in 2016 and 1.8% in 2017. The main risk for the country is the high level of indebtedness, while policy uncertainty could increase risk premia.

Taking into account the measures announced in the draft budget sent to the Commission on 22 January, the deficit is expected to reach 3.4% of GDP in 2016.

• Spain

The Spanish recovery is expected to remain robust over the next three years. Output is set to expand by 2.8% and 2.5% in 2016 and 2017 respectively. But the uncertainty surrounding the formation of a new government could hinder the recovery, the Commission warned.

Meanwhile, the structural effort to cut the deficit continues to be insufficient, according to the EU executive. The deficit is expected to fall to 3.6% of GDP in 2016 and by a further percentage point in 2017.

• Italy

The Italian economy is expected to grow by 1.4% this year and it will continue growing by 1.3% in 2017, according to the forecast.

On the fiscal side, the Commission notes that the deficit is expected to decline “marginally” to 2.5% of GDP, due to the additional spending included in the draft budget for this year. This means the debt ratio would decrease only slightly in 2016 (132.4% of GDP) also due to the worsening structural balance, although it will fall more in 2017 (130.6% of GDP) thanks to higher economic growth.

• Greece

The economic outlook has significantly improved compared to the autumn forecast. The growth figure for 2015 has been revised upwards, to 0%. While output is expected to contract by 0.7% in 2016, the situation is expected to improve during the second half of this year to reach 2.7% in 2017.

One of the most striking elements of the new forecast is the improved debt scenario. Now, the Commission expects the debt to peak at 185% of GDP in 2016 and fall to 181.8% in 2017. In autumn, the executive forecasted a debt figure of 199.7% of GDP in 2016, and 195.6% in 2017.

European Commission

• Winter forecast