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European Economic Forecast – Winter 2017

European Commission, (2017), “European Economic Forecast – Winter 2017”, European Commission Institutional Paper 048, January

The European economy has proven resilient to a number of challenges. Last year saw an unusual string of economic, political and security events that could have dented or even derailed the recovery: concerns about growth in emerging markets, exceptionally weak world trade, terrorist attacks in some Member States and neighbouring countries, the UK’s vote to leave the EU, an acrimonious US election campaign and the large policy uncertainty that has followed, to mention just a few. Nonetheless, GDP grew in line with the projections we made a year ago, accelerating somewhat in the second half of 2016. It is expected to continue growing at a pace above potential this year and next, driven mainly by domestic demand. The recovery seems to be firmer than many observers thought a few months ago. We need, however, to remain cautious and avoid hasty conclusions. The fact is that despite the recent good news, the recovery does not yet extend to the entire economy and is assailed by risks. Its partial nature is reflected in the level of unemployment, which though falling, remains high and in the continued shortfall in investment. The investment share of GDP is still two percentage points lower than in the early 2000s.

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