BRUSSELS Feb 13 Euro zone's economic growth is
expected to lose some speed this year and to rebound in 2018
while the British economy will nearly halve its expansion by
2018, the European Commission said on Monday, warning of higher
The EU executive forecast that growth in the 19 countries
sharing the euro would slow to 1.6 percent this year from 1.7
percent in 2016, but would gain speed in 2018 when the bloc's
gross domestic product (GDP) is expected to increase by 1.8
Growth forecasts were slightly revised up for this year and
2018 from the Commission's previous estimates released in
November when euro zone GDP was estimated to grow 1.5 percent
this year and 1.7 percent in 2018.
The revision was due to "better-than-expected performance in
the second half of 2016 and a rather robust start into 2017,"
the Commission said, noting however that "the outlook is
surrounded by higher-than-usual uncertainty."
The "still-to-be-clarified" intentions of U.S. President
Donald Trump in "key policy areas" are seen as the first cause
of uncertainty for the bloc's economy, which will also face
other political risks due to the likely beginning of Brexit
negotiations this year and elections in several EU countries,
the Commission said.
Britain is expected to pay a higher cost for the political
uncertainty surrounding its divorce talks from the EU. Its GDP
growth is forecast to decline from 2.0 percent in 2016 to 1.5
percent this year, and to further slow down to 1.2 percent next
Britain's "business investment is likely to be adversely
affected by persisting uncertainty while private consumption
growth is projected to weaken as growth in real disposable
income declines," the Commission said.
The gloomy forecast on the British economy are however
better than previously estimated by the Commission which had
predicted in November Britain would grow 1.9 percent last year
and only 1.0 percent this year. The 2018 forecast is unchanged.
Consumer prices in the euro zone are forecast to markedly
pick up this year, as inflation will surge by 1.7 percent from
0.2 percent last year. The 2017 estimate is higher that the 1.4
percent inflation growth predicted by the Commission in
But euro zone inflation is expected to slow again in 2018 to
1.4 percent and core inflation, which excludes more volatile
prices, is set to rise only gradually.
This is still "short" of the European Central Bank's target
of an inflation "below, but close to 2 percent", the Commission
However, this is not seen as sufficient to keep the ECB's
stimulus plan to continue indefinitely. "With inflation picking
up from low levels, we cannot expect current monetary stimulus
to last forever," the Commission's vice president Valdis
Dombrovskis said, urging euro zone states to continue structural
(Edited by Alissa De Carbonnel)