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Winter 2016 Economic Forecast: Weathering new challenges

07.02.2016

Winter 2016 Economic Forecast: Weathering new challenges

On 4 February 2016 the European Commission has published the Winter 2016 Economic Forecast. The document show that the European economy is now entering its fourth year of recovery and growth continues at a moderate rate, driven mainly by consumption.

The Winter Forecast states that "... despite the continued confluence of supporting factors, the acceleration of economic activity expected this year is minor: GDP in the euro area is forecast to expand by 1.7% compared to 1.6% last year. Growth should pick-up further to 1.9% in 2017 but this will depend crucially on a rebound in investment, which has so far remained elusive and is sensitive to the materialisation of the risks surrounding the central scenario. The world economy has been slowing down. Its growth in 2015 is estimated at only 3%, and the expected recovery is rather shallow and surrounded by risks. While the largest advanced economies are experiencing continuing recoveries or maturing cycles, many emerging market economies are facing a very difficult outlook. For China, this forecast projects a gradual slowing of GDP growth and a smooth ‘rebalancing’ towards a more sustainable and consumption-driven growth model. Even so, the drop in China’s external trade has left its mark on world trade growth, affecting mostly other emerging and developing economies. The central scenario of a ‘soft landing’ in China is subject to substantial risks. Concerns about the Chinese economy have sparked two bouts of global financial market volatility in the past half-year. Other emerging markets are exposed - to varying degrees - to financial vulnerability, heightened by the turn of the interest-rate cycle in the US and the dollar’s appreciation; to structural weaknesses; geopolitical tensions; and the sharp drop in a wide range of commodity prices." 

The full document is available at the following link:

http://ec.europa.eu/economy_finance/publications/eeip/pdf/ip020_en.pdf