Brussels economists expect 1.5 percent of growth in 2017 for the euro area

BDI "Econ Jour Fixe" growth forecast

Recently, all major international institutions have published their growth forecast for the year 2017. In BDI’s last „Econ Jour Fixe“ on 18 January 2017, representatives of the European Institutions and other organizations concluded a joint forecast of 1.5 percent growth for the euro area.

The International Monetary Fund (IMF)‘s latest forecast from 16 January 2017 anticipates a GDP growth of 1.6 percent for the euro area. 1.5 percent is estimated for Germany and not more than 0.7 percent for Italy. The country is expected to reach its pre-crisis level not until 2025. To boost growth, the IMF recommends to continue an accommodative monetary policy, accompanied by supporting fiscal policies. Participants of the Econ Jour Fixe meeting, consisting of representatives from European institutions, think tanks, employers’ associations and trade unions, discussed this recommendations critically.

There was no consensus about the question, whether additional fiscal spending and investments in Germany – „fiscal stance“ is the key word here – may lead to more growth in Italy and the other crisis countries. Related to this, the adjustment of price competitiveness by higher inflation in Germany and lower inflation in the crisis countries is a highly complex development. However, the participants agreed, that all euro area countries – including Germany – have to face great national efforts and implement structural reforms to increase growth and productivity.

The participants‘ individual growth forecasts for 2017 ranged between 1.2 percent and 1.75 percent (average 1.54 percent) for the euro area and between 1.25 percent and 1.9 percent (average 1.66 percent) for the EU. Hence, the Brussels Econ Jour Fixe joint forecast is in the mid-table of estimates of other institutions.