Spring 2017 Economic Forecast: good news for Europe and Italy

Italy’s economy is set to continue expanding by about 1% driven by stronger external demand and the recovery of investment

The EU flag
The EU flag (Credits: ADRIAN DENNIS/AFP/Getty Images)

The European Union has just released its new Spring 2017 Economic Forecast, which is prospecting a very steady growth ahead for the so-called Old Continent.

The new document states that the European economy has entered its fifth year of recovery, which is now reaching all EU Member States. This is expected to continue at a largely steady pace this year and next. In particular, it is explained that the global economy gathered momentum late last year and early this year as growth in many advanced and emerging economies picked up simultaneously.

Global growth (excluding the EU) is expected to strengthen to 3.7% this year and 3.9% in 2018 from 3.2% in 2016 as the Chinese economy remains resilient in the near term and as recovering commodity prices help other emerging economies. The outlook for the US economy is largely unchanged compared to the winter. Overall, net exports are expected to be neutral for the euro area’s GDP growth in 2017 and 2018. GDP growth in the EU as a whole is expected to remain constant at 1.9% in both years, a 0.1% more if compared to previous Winter Forecast.

Unemployment will continue its downward trend, but it remains high in many countries. In the euro area, it is expected to fall to 9.4% in 2017 and 8.9% in 2018, its lowest level since the start of 2009. This is thanks to rising domestic demand, structural reforms and other government policies in certain countries which encourage robust job creation. The trend in the EU as a whole is expected to be similar, with unemployment forecast to fall to 8.0% in 2017 and 7.7% in 2018, the lowest since late 2008.

Italy’s economy, instead, is set to continue expanding by about 1% in 2017 and 2018, driven by stronger external demand and the recovery of investment. Equipment investment, in particular, should benefit from the extension of tax incentives and the accommodative monetary policy stance. Private consumption growth is projected to slow in 2017, due to the impact of slower employment growth and higher inflation on real disposable income. The general government deficit is expected to slightly decline in 2017, while the debt-to-GDP ratio is set to broadly stabilise over the forecast horizon.

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