EU warns of higher risks to European economic growth outlook

It has cut its prediction for the 19-country bloc in 2016 to 1.7% from the 1.8% it had forecast in November.

GDP growth was 6.9pc in 2015, the Commission said, an upward revision of nearly an entire percentage point on its November forecast. The projection for 2017 was maintained at 1.9 percent.

The European Commission expects deficit in 2016 to further decrease to 1.1% of GDP whilst the debt ration is projected to fall further in 2015 to 64% of GDP, also thanks to the expected repayment of some tax arrears from the public energy utility corporation.

Low oil prices, favorable financing conditions and the euro’s low exchange rate were expected to further benefit the bloc’s growth.

One factor that continues to weigh on sentiment, especially in the eurozone, is persistently low inflation-despite efforts by the European Central Bank to push up consumer prices through a big asset-purchase program. The recovery will gain speed in 2017 with economic expansion of 1.9 per cent, the European Union executive said in its winter economic forecasts.

Unemployment in the euro area is expected to fall from record levels to 10.5% in 2016 and 10.2% in 2017.

Malta’s economy grew by 5.4% (y-o-y) in the third quarter of 2015, slightly less than the 5.8% increase reported in the second quarter.

Portugal’s budget deficit is predicted to rise to 3.4% this year, way above the 1.8% set inside its stability programme.

The eurozone debt average was 93.5 per cent last year and will improve only modestly to 92.7 per cent and 91.3 per cent this year and next. “Nonetheless, the weaker global environment poses a risk and means we must be doubly vigilant”.

European Economic and Financial Affairs Commissioner Pierre Moscovici.

“The central scenario of a “soft landing” in China is subject to substantial risks”, the commission said. Exporting industries are also expected to continue benefitting from the depreciated euro, to which the national currency is pegged, given that a substantial portion of Bulgarian exports go to non-euro area countries. The commission is once again locked in negotiations with Greece over its spending and pension policies and failure in Spain to form a government following a surge of antiestablishment parties risks derailing austerity measures there.

Private consumption is projected to become the main driver of growth over the forecast horizon. “They show that more robust domestic consumption and recovering exports should grow our economy”, Finance Minister Rimantas Sadzius said in a press release on Thursday.

Mr. Moscovici said the omission was intentional.

Net exports are forecast to contribute positively to growth, but to a lesser extent than in 2016, driving the current surplus wider.