EU economy projected to grow 1.1% in 2014, inflation will stay low
(Reuters) – The euro zone economy will expand slightly more slowly next year than previously expected because of weaker private demand and investment and inflation will stay well below the central bank target over the next two years.
The European Commission forecasts published on Tuesday are likely to add to arguments for an interest rate cut by the European Central Bank, which is to discuss its next policy move on Thursday.
The European Union executive arm said in a regular forecast that the economy of the 18 countries that will share the euro from next year will expand 1.1 percent in 2014 after a 0.4 percent contraction this year. In 2015, the euro zone is to accelerate to growth of 1.7 percent.
In May, the Commission forecast that the euro zone would grow 1.2 percent in 2014, but it then made more optimistic assumptions on private consumption and investment, even though assumptions of government demand remained unchanged.
Nevertheless, recession was firmly behind the euro zone from the second quarter of this year and the pace of recovery would slowly accelerate quarter-on-quarter.
“There are increasing signs that the European economy has reached a turning point,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement.
“The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery,” he said.