Euroarea 2016 Forecast

November 9, 2014

Last week all eyes were on ECB and Mario Draghi in hope for more information regarding the possible QE program. In general, ECB didn’t deliver and all the QE supporters were left with empty handed, however this does not mean that the option is off the table.

As Mr. Draghi said several times, they are ready to implement more unconventional measures if needed. Therefore anything is possible in the future and most likely the subject will come up again in the beginning of 2015, which is considered the most probable time for the ECB to make their move.

While the world was focused on ECB, European Commission released its Autumn Forecast, a complete update of its economic estimates, including for the first time its outlook for 2016.

„The EU economy is struggling to shake off its lethargy. Since the crisis struck, most Member States have been unable to generate or sustain strong economic momentum. While the recovery from such a deep crisis has been expected to be very subdued, the persistance of weak growth dynamics suggests that the EU’s current predicament is praticular“.

That was the opening statement from the report regarding EU and EA (Euroarea) economic outlook. Generally, slow recovery with very low inflation is something that seems to be unavoidable at this point but it is still better than no recovery at all.

According to the European Commission, Euroarea unemployment is expected to drop to 10,8% in 2016, while inflation is expected to reach 1,5% and Real GDP growth to 1,7%. What stands out is the fact that very high unemployment rates are expected to remain in place in Spain (22%), Greece (22%), Cyrpus (14,8%) and Italy (12,4%). I do hope that their forecast is wrong regarding the unemloyment because even if the combined rate drops to 10,8%, it is still far too high.

Regarding Real GDP Growth it is very nice to read that the fastest growing economies are expected to be the ones who suffered most during the financial crisis. Ireland and Greece are in the lead with expected growth of 3,7% in 2016, followed by Latvia 3,6% and Lithuania 3,4%. Among the big players, growth is expected to be slower putting Germany at 1,8%, France 1,5%, Spain 1,5% and Italy 1,1% .

Who wants to read the whole report in detail feel free to do it here: http://ec.europa.eu/economy_finance/publications/european_economy/2014/pdf/ee7_en.pdf