EU Releases Economic Forecast Predicting “Modest Recovery”

The European Union released a report that estimates economic growth throughout the EU will occur at a “modest pace” over the next three years. The report, which was released on Nov. 5, nevertheless forecasts an overall recovery for the broader European economy, predicting that the real GDP of the EU’s twenty-eight member states will grow by 1.9 percent in 2015, 2.0 percent in 2016, and 2.1 percent in 2017. Predictions for real GDP growth in the nineteen-country Eurozone are somewhat lower, at 1.6% in 2015, 1.8% in 2016, and 1.9% in 2017. The report states that the recovery will be “widespread across member states,” allaying concerns that a few outliers with rapid economic growth might obscure overall lackluster growth. The economy of the worst-performing country, Greece, is forecasted to contract before expanding by 2.7% in 2017.

The report also speculates about potential causes for this growth. Factors contributing to the recovery, according to the EU, may include low oil prices and a weaker Euro exchange rate. The influx of Syrian refugees may also help the European economy by providing an increase in labor supply, provided that proper policies to facilitate labor market entrance are in place.

Potential challenges to future growth include geopolitical tensions; the “downturn in emerging market economies,” especially China; and the recent Volkswagen emissions scandal. Although the report appears to be cautiously optimistic, it warns that “the impact of the positive factors is fading, while new challenges are appearing.”