EU Commission downgrades United Kingdom growth for 2019 Brexit year to 1.1%

10 November, 2017, 01:03 | Author: Terri Saunders
  • The Brandenburg Gate reflected by a puddle on Pariser Platz Square in Berlin Germany Tuesday Nov. 7 2017

The euro area economy is set to grow at its fastest pace in a decade this year, with real GDP growth forecast to rise to 2.2 pct, according to the European Commission's Autumn 2017 Economic Forecast.

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.

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.

The current account gap is forecast to continue widening from 2.4%/GDP in 2016 to 3.1% in 2017 and 3.2% in 2018, due to strong domestic demand and import growth, which is projected to continue outpacing the growth of exports, in line with strong private consumption.

The International Monetary Fund is expecting United Kingdom growth of 1.7 per cent this year, while the Organisation for Economic Cooperation and Development is forecasting growth of 1.6 per cent.

By contrast to the slowing United Kingdom economy, the rest of Europe will continue to grow robustly, carrying on the strong levels of economic expansion seen over the previous year or so. For the next two years, the Commission forecasts decrease in employment growth to 0.4% and 0.3% due to limited labour supply.

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Investment on the other hand is set to be sustained by the residential construction sector, which will grow further in 2018.

"Growth in private consumption will be modest and uncertainty will continue to weigh on business investment decisions", Mr. Moscovici said. He also said the eurozone needs to become "more resilient" to future shocks and turn itself into a "true motor of shared prosperity". The economy would slow even further to 1.3 percent in 2018, followed by 1.1 percent in 2019. By contrast, diminishing uncertainty and improving sentiment in Europe could lead to stronger-than-forecast growth, as could stronger growth in the rest of the world.

The Commission noted the the prospect of Brexit "is already having an impact on economic activity" and insisted that its forecasts for 2019 where based "on a purely technical assumption of status quo in terms of trading relations between the EU-27 and the United Kingdom". Members of the common-currency are seen with an average deficit of 1.1% of GDP in 2017, down from 1.4% in the earlier forecast.

The surplus achieved by the Labour government also features in the report which projects it to be 0.9% by the end of 2017, but is believed to decline to 0.5% in 2018, a figure that will be sustained in 2019.

However, as the European Union eyes economic growth for all its members next year for the first time since 2007, its outlook for the U.K.is souring.

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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