BRUSSELS—The European Commission on Tuesday cut its growth forecasts for the eurozone and the European Union, citing the tensions in Ukraine and the Middle East along with a lack of investment.
The EU’s executive arm also believes inflation in the eurozone will remain below the rate targeted by the European Central Bank until at least 2016. That is likely to boost expectations of more aggressive measures by the ECB such as large-scale purchases of government bonds and other assets.
The commission said it now expects gross domestic product in the 18-country eurozone to grow 0.8% this year, down from the 1.2% it forecast this spring. In 2015, the eurozone economy will likely grow 1.1%, before picking up to 1.7% in 2016, it said.
The forecasts for the currency union were dragged down by lower than-expected growth in the biggest countries, Germany and France, while Italy’s economy is expected to shrink 0.4% this year.
“The economic and employment situation is not improving fast enough,” said Jyrki Katainen, the commission’s vice president for jobs and growth.
The picture looks only mildly better for the broader EU, which includes the faster-growing U.K.
The 28 EU countries are now expected to grow on average 1.3% this year, down from 1.6% growth seen in the spring. Next year, the EU’s GDP is expected to rise 1.5%, before reaching 2% in 2016.