European Growth Outlook
Europe defies global turbulence. However, growth is not yet self-sustaining.
- The economy of the European Union is likely to grow by 1.9 percent in 2016; the economy of the Euro area by 1.7 percent. The biggest driver of growth is still private consumption, which is being boosted by cheap oil and low interest rates. The weaker euro is supporting exports, but exports are still only likely to make a small contribution to growth. Investments are gradually increas-ing, yet remain far from pre-crisis levels.
- The future development of the emerging market countries, migration flows towards Europe and geopolitical conflicts pose considerable fore-cast risks. The influx of refugees will lead to higher public spending in the short term and provide a mild economic stimulus. In the medium to long term the economic impacts will depend on how the refugees are integrated into the labour market.
- The unemployment rate is likely to fall slightly from 9.5 percent in 2015 to 9.0 percent this year. There remain large differences between the labour mar-kets of the various Member States. While an unemployment rate of 4.9 percent is forecast for Germany, Greece and Spain are likely to be saddled with unem-ployment of 24.0 percent and 20.4 percent respectively.
- ECB monetary policy remains expansive. The downward trend in prices has been successfully transformed into a modest rise. Fiscal policy is expected to remain largely neutral in 2016, with debt as a proportion of GDP falling slightly to 86.9 percent in the EU and 92.7 percent in the Euro area.