Eurozone growth at fastest pace in 10 years

Commission raises forecasts for euro economy, is upbeat on Republic

The European Commission assesses that this year the Croatian economy will grow by 3.2 percent, 2.8 percent next year, and 2.7 percent in 2019.

In its autumn economic forecast, the Commission said the Grand-Duchy's economy would expand by 3.4% this year and then by 3.5% and 3.3% in 2018 and 2019, respectively. It also expects a continued decline in public debt, which should amount to 80.3 percent of GDP this year, 77.4 percent next year, and 74 percent in 2019.

The European Union has raised its 2017 growth forecast for the 19-country eurozone to a decade high. The bloc also cut its United Kingdom 2017 economic growth forecast to 1.5% from 1.8% while keeping it steady at 1.3% for next year.

"Economic growth in the United Kingdom has been slowing since the start of the year, as higher consumer prices constrained private consumption growth", the commission report said. It said Italy's GDP is expected to rise 1.5% in 2017, compared to the May forecast of 0.9%, but slow to 1.3% in 2018 (compared to 0.9% predicted previously) and 1% in 2019. Monthly government statistics to date suggest that the 2017 general government primary balance target (1.75 pct of GDP in terms of the ESM programme definition) will be met, with the balance of risks tilted to the upside.

In its report, the European Commission points out that growth in the first half of this year remained "surprisingly strong", and that the impact of the restructuring process in Agrokor, the largest private employer, was smaller than expected.

Moscovici, the French member of the Commission, said the decision over closing the procedure will be taken in spring 2018.

"Investment is also picking up amid favorable financing conditions and considerably brightened economic sentiment as uncertainty has faded", it added.


He also noted that the current growth cycle is characterised by "less output" than previous cycles, and that "a sluggish wage growth partly reflects low productivity growth and persistent slack in [the] labour market". Employment is projected to increase by 0.7% in 2017.

The main factor behind this year's growth is set to be external demand, with domestic demand coming in second because of a significant contraction in investment.

"Investment in construction is projected to contribute substantially to growth in domestic demand, with the strong momentum in residential property investment in 2016 expected to continue in the medium term, supported by government policies", the commission says.

The unemployment rate in Croatia will this year be 11.1 percent, falling to 9.2 in 2018, and 7.5 percent in 2019, which should be somewhere near European Union average.

United Kingdom growth slowed down this year - to 1.5 percent from 2.3 percent in 2015 and 1.8 percent in 2016 - because higher prices led to lower consumption.

France's debt was still high at 96.9 percent and would remain at that level through 2019.

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