Ireland will remain the EU’s fastest growing economy this year and next year, the European Commission has predicted in its autumn economic forecast. The forecast for this year is in line with the government’s, but the data for the following two is 0.2 of a percentage point lower.
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The Commission explained that real GDP growth is forecast to moderate to 3.6% in 2016 and further to 3.1% in 2017.
The euro area economic recovery this year has been resilient and widespread, but has remained slow, the report said.
It is expected to continue at a modest pace next year despite the more challenging conditions in the global economy.
Despite its cautious outlook for the next couple of years, the commission said that credit constraints are “clearly receding” and market funding will continue to play an increasing role in supporting investment, which should start becoming a stronger driver of growth.
The EU’s economists said that progress in overcoming the legacies of the crisis will help boost growth but cautioned that structural reforms in the eurozone haven’t been enough to significantly increase growth potential.
Istat also said that business confidence is at its highest level since 2007, while consumer confidence is at a 13-year-high.
Italy has the EU’s second-highest debt level at 133% of gross domestic product.
The expected increase in oil prices is also seen as positive for the euro zone inflation, which will rise to 1 percent in 2016 from 0.1 per cent in 2015, although still far from the European Central Bank target of close to 2 percent.
“The analysis shows that, if managed properly, the inflow of refugees will have a small favorable effect on growth in the short and medium term”.
Paris is expected to post a deficit of 3.8% this year, 3.4% in 2016 and 3.3% the year after.
Downside risks include what the Commission diplomatically referred to as “the recent turmoil in main trading partners” as well as sanctions against Russian Federation, which it said could weigh more on activity than forecast.
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Moscovici’s comments sparked a row between officials in Brussels and Madrid. For 2016, the general government deficit is set to increase to 1.3 percent of GDP.
