United Kingdom growth will lag behind eurozone, says European Commission forecast

The Brandenburg Gate reflected by a puddle on Pariser Platz Square in Berlin Germany Tuesday Nov. 7 2017

In updated forecasts, the EU's executive Commission said it expects growth this year of 2.2 percent, which would be the highest rate for the 19-country bloc since 2007. Only the United Kingdom's growth outlook is nearly the same as Italy's, but Britain was excluded from the EU-28 table for the first time in view of Brexit.

"Based on a no-policy-change assumption, the surplus of the general government balance is projected to slightly improve in 2019".

"After five years of moderate recovery, European growth has now accelerated", said Pierre Moscovici, European commissioner for economic and financial affairs, taxation and customs, at a press conference.

Growth in 2018 is to slow to 2.1 percent and to 1.9 percent in 2019, the Commission said.

In its previous forecasts in May, the Commission counted on only a 1.9 percent growth this year and next year.

Last month the European Central Bank (ECB) said it was starting to wind down the massive bond-buying stimulus program it had driven over the last number of years to help steer the eurozone out of the debt crisis it found itself in. "This is substantially higher than expected in spring (1.7%)", the Commission noted.

However, in view of Malta's openness to trade (nominal exports and imports combined to reach 270% of GDP in 2016) any volatility in Malta's main exporting sectors would have a disproportionately large impact on real GDP growth.

The EU sharply raised its eurozone growth forecast for 2017 on Thursday, confident that the economic recovery was gathering pace despite the uncertainties of Brexit.

The annual average inflation is expected to be 2.9% in 2017 and accelerate further to 3.0% in 2018. Core inflation, which excludes energy and unprocessed food prices, by contrast, has been rising but remains subdued, reflecting the impact of a prolonged period of low inflation, weak wage growth as well as remaining labour market slack.

With current surveys already suggesting that heightened uncertainty is weighing on business investment in the United Kingdom, the EC report forecast investment growth will weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.

The Commission expects a gradual rebound of investment from the second half of the year.

The country with the lowest growth rate this year will be Italy - 1.5 percent - ahead of an uncertain electoral year.

In October, the International Monetary Fund (IMF) said that Romania's real GDP growth is projected to reach 5.5% in 2017 before it decelerates to 4.4% in 2018.

The commission stressed that its analysis of Britain's prospects was based on a "purely technical assumption of status quo" in terms of the UK's relations with the European Union, and did not take into account any possible outcome from negotiations on a future trade deal.

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