EU cuts growth estimates for eurozone economies
The EU is expecting the eurozone economy to grow 0.8% in 2014 and 1.1% in 2015, down from their initial forecasts of 1.2% and 1.7%, respectively recorded in May, 2014. According to the Commission, inflation in the eurozone will be even weaker than the European Central Bank’s (ECB) forecast as it expects inflation to stand at 0.8% in 2015, almost half of ECB’S forecast of 1.1%. The Commission stated that the inflation will stand at 1.5% in 2016 when compared to the ECB’s forecast of 1.4%.
Economic growth in Germany is expected to stagnate in the second half of this year. The Commission stated that the country will grow by 1.1% in 2015, down 2% from May forecasts, and that it will grow by 1.8% in 2016 with the help of an increase in the labor market, strong financial conditions and improving external demand.
Spain’s gross domestic product (GDP) is expected to grow 1.7% next year and 2.2% in 2016, compared with a growth rate of 1.2% in this year, owing to stronger domestic demand. However, the EU signaled a contraction for Italy, which needs to increase its exports for recovery, forecasting a contraction of 0.4% this year and an expansion at 0.6% in 2015. Initial estimates called for a 0.6% and 1.2% expansion, respectively reported in May. The country’s domestic demand is expected to be weak due to increasing unemployment which is expected to stand at 12.6% this year and next year.
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