EU Commission sees Greek primary surplus at 3.9 percent/GDP in 2018

The Brandenburg Gate reflected by a puddle on Pariser Platz Square in Berlin Germany Tuesday Nov. 7 2017

The European Commission (EC) increased the forecast of this year's GDP growth by 0.7 percentage point to 4.2 percent.

According to its Autumn Forecast, the Commission predicted growth to continue in both the euro area and in the European Union at 2.1 percent in 2018 and at 1.9 percent in 2019.

Eurozone GDP growth has yet to catch up with the 3% expansion in 2007, before the global financial crisis hit.

However, Pierre Moscovici, the commissioner for economic and financial affairs, warned that while both the eurozone and the wider European Union are expected to grow in 2018 and 2019, "challenges remain in the form of high debt levels and subdued wage increases".

Strong export growth, particularly in services, and a fall in imports related to the contraction in investment is pushing up the current account surplus, which is forecast to approach 10% of GDP in 2017. A benign external environment is expected to boost net exports, which should thereby contribute to growth this year and the next.

Real Irish GDP growth is predicted to rise by 4.8 per cent in 2017, moderating to 3.9 and 3.1 per cent in 2018 and 2019.

"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.

"After five years of moderate recovery, European growth has now accelerated", said Pierre Moscovici, the European Commissioner for Economic and Financial Affairs, Taxation and Customs.

The government deficit is moving closer to balance but risks to the fiscal outlook remain, it said. "It is expected that there will be some weakening of consumption at the end of the forecast period when higher inflation will reduce real household disposable income and slow down employment growth", the EC said in its report.




The economies of all member states are expanding and labour markets improving, but wages are rising only slowly.

However, the report noted that while the country is experiencing a very low unemployment rate and increasing skill shortages, wage growth has been limited, due to strong increases in labour supply, on the back of inflows of foreign workers.

The surplus is expected to decline to 0.5% in 2018, once the 2018 budget measures are introduced, but should remain stable at the same figure in 2019, under a no-policy-change assumption.

"Investment is also picking up amid favourable financing conditions and considerably brightened economic sentiment as uncertainty has faded".

Domestic demand remains the primary driver of growth.

"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.

"Yet challenges remain in the form of high debt levels and subdued wage increases".

The labour market performed better than expected, with the unemployment rate dropping to 21 pct in July, down from an annual average of 23.6 pct in 2016.

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