External risks slow EU

The European Commission (EC) yesterday downgraded its economic forecasts for the EU and the euro zone for this year by one tenth, setting growth at 1.9% and 1.7%, respectively, due to “ more pronounced” external risks. The Commission's predictions show a European economy entering its fourth year of recovery and continuing to maintain the pace of growth of 2015, when the GDP of the EU grew by 1.9% and that of the euro zone by 1.6%, but at a rate that can only be described as “moderate” and driven mainly by consumption.

At the same time, much of the global economy is struggling with “significant challenges” and therefore “risks affecting the growth of European economies are increasing” due to the slowdown in China and other emerging countries, a weakening international trade and various geopolitical uncertainties, among other issues.

Regarding the prospects for the labour market, the EC predicts a “modest improvement”, with unemployment rates falling, although at a slower pace than last year. The unemployment rate in the euro zone is predicted to fall from the 11% recorded last year to 10.5% this year and still further by 2017, to 10.2%.

As for public deficits, these are forecast to fall further in the euro zone thanks to stronger activity and, to a lesser extent, less interest payments. Thus, the deficit will drop from last year's 2.2% to 1.9% this year, according to the EC's calculations. In 2017, the deficit will decline to 1.6% of GDP in the euro zone. Public debt will also decrease in the euro zone, the EU executive predicts, from 93.5% of GDP to 92.7% this year and 91.3% in 2017.