[BRUSSELS] Eurozone economic growth will slightly accelerate this year and next, the European Commission estimated on Thursday, but the pace will be slower in 2016 than previously forecast because of increased global risks.
The gross domestic product (GDP) of the 19-country single currency bloc is expected to expand by 1.7 per cent this year from 1.6 per cent in 2015. The recovery will gain speed in 2017 with economic expansion of 1.9 per cent, the EU executive said in its winter economic forecasts.
The growth estimate for this year is a slight downward revision of the 1.8 per cent seen in the last set of forecasts in November. The 2017 figure was unchanged.
External factors are seen as the main risks to the euro zone economy that will continue to grow mostly because of domestic consumption. "Europe's moderate growth is facing increasing headwinds, from slower growth in emerging markets such as China, to weak global trade and geopolitical tensions in Europe's neighbourhood," Commission Vice President Valdis Dombrovskis said in a statement.
Low oil prices, cheap credit and the weak euro will continue to boost eurozone growth, but will be offset by a "disorderly adjustment" in China and the possibility of higher interest rates in the United States.
All national economies of the euro zone are expected to grow this year, with the exception of Greece where GDP will drop by 0.7 per cent, albeit a lesser decline that the 1.3 per cent decrease forecast by the Commission in November.
The Greek economy will return to growth in 2017 with an expected 2.7 per cent expansion.
Germany's economy, the euro zone's largest, will grow 1.8 per cent this year and next, compared with November forecasts of 1.9 per cent. It also will continue recording large current account surpluses, exceeding the 6 per cent limit recommended by the EU institutions.
Cheap oil will continue suppressing consumer prices, with euro zone inflation seen at only 0.5 per cent this year, the Commission said.
In its last forecast released in December, the European Central Bank had put inflation at 1 per cent in 2016, but has later said its estimates were to set to be cut.
The Commission sees consumer prices growing by 1.5 per cent in 2017, slightly below the ECB forecast of 1.6 per cent, and still off the ECB's target of just under 2 per cent.
Unemployment rates in eurozone countries will continue to fall but at a slower rate and the bloc's average will not stay just above 10 per cent during the forecast horizon.