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EU Sees Eurozone 2017 Growth At Decade High

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Eurozone is set for its fastest growth in a decade this year, the European Commission said on Thursday, thanks to resilient private consumption, stronger global growth and falling unemployment.

In its Autumn Forecast, the executive arm of the European Union raised the euro area growth forecast for this year to 2.2 percent from 1.7 percent.

The EU growth forecast for this year was also lifted to 2.3 percent from 1.9 percent seen in the Spring projections.

Eurozone growth has surpassed expectations this year, the commission said. The economies of all Member States are expanding and their labor markets improving, but wages are rising only slowly, the agency added.

"After five years of moderate recovery, European growth has now accelerated," Pierre Moscovici, the EU Commissioner for Economic and Financial Affairs, said.

"We see good news on many fronts, with more jobs being created, rising investment and strengthening public finances."

However, challenges remain in the form of high debt levels and subdued wage increases, the EU top-official added.

A more pronounced acceleration in wages, supported by productivity gains, would be an important signpost signalling
the ability of the expansion to continue at a robust pace, the commission said.

The slowing pace of job creation and household purchasing power
growth implies a slight moderation in momentum over the next two years, the EU said.

Yet, the commission raised the Eurozone growth projection for next year to 2.1 percent from 1.8 percent and forecast 1.9 percent expansion for 2019.

The EU growth projection for next year was raised to 2.1 percent from 1.9 percent. For 2019, growth was seen at 2019.

The Eurozone recovery, which has been underway for 18 straight quarters, remains incomplete, the EU said, citing instances such as the still significant slack in the labor market and untypically low wage growth.

GDP growth and inflation are therefore still dependent on policy support, the commission added.

Growth forecasts for Germany were raised sharply to 2.2 percent for this year and 2.1 percent next year. In 2019, growth is seen at 2 percent.

France's growth outlook for this year was lifted to 1.6 percent from 1.4 percent and that for next year was left unchanged at 1.7 percent. French growth was forecast at 1.6 percent in 2019.

Italy and Spain also had their growth forecasts raised for both this year and next.

Inflation is forecast to pickup gradually in the remainder of 2018 and throughout 2019. The Eurozone inflation forecast for this year was trimmed to 1.5 percent from 1.6 percent, while the outlook for next year was raised to 1.4 percent from 1.3 percent. Inflation was seen at 1.6 percent in 2019.

The unemployment rate forecast for euro area for this year was slashed to 9.1 percent from 9.4 percent. The projection for next year was lowered to 8.5 percent from 8.9 percent. The figure is seen dropping further to 7.9 percent in 2019.

Given the ongoing negotiation on the terms of the UK withdrawal from the EU, projections for 2019 are based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the UK, the commission said.

Depending on the outcome of the Brexit negotiations, the transition may not be as smooth as technically assumed in this forecast, the EU said.

The UK growth forecast for this year was slashed to 1.5 percent from 1.8 percent. The outlook for next year was left unchanged at 1.3 percent. Growth was projected to ease further to 1.1 percent in 2019.

by RTT Staff Writer

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