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Euro zone growth prospects brighten slightly - EU Commission
February 5, 2015 / 10:20 AM / 3 years ago

Euro zone growth prospects brighten slightly - EU Commission

BRUSSELS (Reuters) - The euro zone’s economic prospects are brighter now than they were three months ago thanks to cheaper oil, a weaker euro and the European Central Bank’s quantitative easing, the European Commission said on Thursday.

European Commissioner for Economic and Financial Affairs Pierre Moscovici presents the EU executive's winter economic forecasts during a news conference at the EU Commission headquarters in Brussels February 5, 2015. REUTERS/Yves Herman

The EU executive arm raised its forecasts for gross domestic product (GDP) expansion in the 19 countries sharing the euro to 1.3 percent this year from the 1.1 percent seen in November and to 1.9 percent in 2016 from an earlier 1.7 percent.

Growth last year was 0.8 percent, the Commission said.

“Europe’s economic outlook is a little brighter today than when we presented our last forecasts,” said Pierre Moscovici, Commissioner for Economic and Financial Affairs, referring to forecasts released in early November 2014.

Growth will also benefit from a recovery in investment. The Commission sees it increasing 2.0 percent this year over 2014 and by 4.4 percent in 2016, boosted by the ECB’s money-printing measures and the European Union’s 315 billion euro ($358 billion) investment plan.

Investment grew by just 0.9 percent in 2014.

“The fall in oil prices and the cheaper euro are providing a welcome shot in the arm for the EU economy. Meanwhile, the Investment Plan for Europe and the ECB’s important recent decisions will help create a more supportive backdrop for reforms and smart fiscal policies,” he said.

Oil prices more than halved since the middle of last year, lowering costs for euro zone companies and households and the euro weakened 18 percent against the dollar as ECB loosened monetary policy to prevent deflation.

The central bank wants to keep inflation below, but close to 2 percent and announced last month it would buy government bonds on the secondary market to inject more than 1 trillion euros into the economy and make prices go up.

The Commission forecast that consumer prices in the euro zone would fall 0.1 percent this year after a mere 0.4 percent increase in 2014, but will then rise by 1.3 percent in 2016.

Euro zone unemployment is set to fall to 11.2 percent of the workforce this year from 11.6 percent in 2014 and continue dropping to 10.6 percent in 2016 as the economy gathers pace.

“The right economic conditions are in place for sustained growth and job creation. Following the difficult policy choices governments have made due to the crisis, the effects of reforms are emerging,” said Valdis Dombrovskis, Commission vice president responsible for the euro.

“We have to step up the reform momentum to strengthen the recovery and make sure it translates into money in people’s pockets,” he said.

Reporting By Jan Strupczewski; editing by Philip Blenkinsop

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