EU now sees a lower growth rate for 2016 and 2017
BRUSSELS - The European Union has trimmed its economic growth forecasts for the 19 countries that share the euro amid an unpredictable global outlook marked by political uncertainty and weakness in emerging markets.
Although the eurozone economy saw surprisingly high growth in the first quarter, when it regained the size it was before the 2008 financial crisis, EU Commissioner Pierre Moscovici said the recovery "remains uneven."
That's true not only between member states like Germany and Greece, but also within countries, between the wealthy and poor, he said.
In its spring update to its forecasts, the EU predicted that the eurozone economy would grow by 1.6 percent in 2016, down 0.1 points from its expectations made three months ago. Growth is forecast at 1.8 percent in 2017, also a 0.1 point trim to previous predictions.
Inflation is seen languishing at an average annual rate of just 0.2 percent this year before picking up to 1.4 percent next year. That's down from the EU's last forecasts for 0.5 percent and 1.5 percent, respectively. Low inflation is a sign of weak economic activity, and the European Central Bank is tasked with keeping it just under a 2 percent rate.
The EU warned that predictions are especially hard to make now. Moscovici mentioned the risk of slower growth in countries like China, and political events in many parts of the world that could have an immediate impact on Europe.
Furthermore, the price of oil, which has been low over the past year, could nudge up again, and a rise in the euro currency could hurt exporters by making them less competitive in the international marketplace.
On the plus side, unemployment in the eurozone is expected to fall from 10.9 percent in 2015 to 10.3 percent this year and even dip into single digits, 9.9 percent, in 2017. Huge differences within the currency bloc remain, with Greece expecting a jobless rate of 24.7 percent this year, Spain 20 percent and Germany 4.6 percent.
Greece is facing a double challenge since it still is trying to lift itself from the depths of near bankruptcy while at the same time facing the brunt of Europe's migrant crisis.
EU finance ministers will next Monday resume a review of the country's progress on economic reforms that are required before more rescue loans can be paid out.
"They are in the frontline of the migration crisis," Moscovici said. "This is why we will do everything we can to make sure an agreement is feasible."
The forecast said Greece showed "remarkable resilience" last year while "growth is expected to resume in the second half of 2016 and to pick up in 2017, thanks to the return of confidence and the impact of structural reforms."
Britain faces the biggest risk of all EU member states -- the possibility of leaving the EU following the June 23 referendum on continued membership.
In lowering its growth forecasts, the EU said "overall, risks to the outlook are tilted to the downside, reflecting less favorable external demand and uncertainty in the lead-up to the June referendum."