UBS raises 2016 growth forecasts for Germany, France and Spain

[LONDON] Swiss bank UBS raised on Wednesday its growth forecasts for Germany, France and Spain for the current year, but lowered its expectations for Italy.

UBS upgraded its economic growth forecast for Germany to 1.6 per cent for 2016 from 1.4 per cent predicted earlier, saying that domestic demand in the country was a key driver of growth.

It also raised its 2016 annual growth forecast for France by 0.3 percentage points to 1.5 per cent, while leaving its 2017 forecast for France unchanged at 1.7 per cent.

It lifted its current year forecast for Spain by 0.3 percentage points to 2.9 per cent and maintained its 2017 projection of 2.2 per cent for Spain.

However, it was more cautious on Italy and lowered its growth forecast for the country to 1.1 per cent from 1.2 per cent for 2016. It also cut its forecast on Italy to 1.2 per cent from 1.5 per cent for 2017.

"We remain constructive on the economic resilience of the eurozone in 2016/2017 and our growth projection remains somewhat higher for 2017 than for 2016, assuming that economic stimulus will remain strong and some of the external headwinds that hit Europe in late 2015, early 2016, will ease," it said.

"Still, we would caution that stronger growth in 2017, compared with 2016, should not be taken for granted. Substantial fiscal stimulus in Germany, related to the influx of refugees, might ease in 2017. The positive impact of lower oil prices is likely to weaken over time."

REUTERS