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

The European Commission forecasts that the Croatian economy will grow this year more than previously expected, but there are still risks associated with the restructuring of Agrokor.

The growth of Romania's gross domestic product (GDP) is expected to slow down to 4.4% in 2018, up from 3.7% predicted in May, the Commission said in its Autumn 2017 Economic Forecast published on its website.

The eurozone is seen expanding to 2.1% in 2018-still up from a previous expectation of 1.8%-with the growth rate dipping to 1.9% in 2019, when Britain will leave the EU. "Thereafter, the debt-to-GDP ratio is expected to marginally decline to 130.8% in 2018 and to 130.0% in 2019, mainly due to stronger nominal growth". The highest growth this year will be achieved by Romania with 5.7 percent, followed by Malta with 5.6 percent, Ireland 4.8 percent and Slovenia 4.7 percent.

Outside Europe, global tensions as well as adjustments in the Chinese economy or possible protectionist measures by the United States mean that the Commission can not predict whether EU's economic situation will "turn out better or worse than forecast".

But the report was especially sour for non-euro Britain which saw its growth forecast for 2017 slashed to 1.5 percent.

Investment on the other hand is set to be sustained by the residential construction sector, which will grow further in 2018. High households' indebtedness and increasing debt burdens, could also affect consumption growth.

Regarding inflation, the Commission expects that robust domestic demand, additional wage hikes in a tight labour market and additional fiscal stimulus will gradually drive inflation rate upwards and make it re-enter the Romanian central bank's target band of 2.5%±1 pp.

"The European economy has performed significantly better than expected this year, propelled by resilient private consumption, stronger growth around the world, and falling unemployment", the Commission said in a statement.

Unemployment across the currency union is expected to drop faster than expected in May, dipping to 9.1% by year-end and then to 8.5% in 2018 and 7.9% the following year. "Looking ahead, growth is set to decelerate but remain above potential".

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

The EU Commission has downgraded its expectations for United Kingdom economic growth, saying its assumptions are even based on there being no change in trading status after Brexit. Romania's 2017 budget is built on projections for 6.1% economic growth and deficit equivalent to 2.96% of GDP.

This, the Commission said, is for "forecasting purposes only and has no bearing on the talks underway" in the context of the Brexit talks, which resumed Thursday.



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