European Economic Forecast

​While growth is continuing at a moderate rate in Europe, significant parts of the world economy are grappling with major challenges. Growth in the euro area in 2016 is expected to continue, but the recovery is slow, both in historical perspective and compared to other advanced economies. While the renewed drop in energy prices should continue to boost households’ real incomes and consumption, public consumption has surprised on the upside due to the arrival of unprecedented numbers of migrants fleeing war and insecurity in Syria and elsewhere. Fiscal policy more generally is expected to support the recovery this year, and monetary conditions are set to remain highly accommodative. However, despite the continued confluence of supporting factors, the acceleration of economic activity expected this year is minor: GDP in the euro area is forecast to expand by 1.7% compared to 1.6% last year. Growth should pick-up further to 1.9% in 2017 but this will depend crucially on a rebound in investment, which has so far remained elusive and is sensitive to the materialisation of the risks surrounding the central scenario.

​Report EU