EU trims economic growth forecasts amid global uncertainty
The European Union has trimmed its economic growth forecasts for the 19 countries that share the euro, saying the recovery could be held back by a likely rise in the price of oil and the common currency.
Although the eurozone economy saw surprisingly high growth in the first quarter, when it regained the size it was before the 2008 financial crisis, EU Commissioner Pierre Moscovici said the recovery "remains uneven".
That is true not only between member states such as Germany and Greece, but also within countries, between the wealthy and poor, he said.
In its spring update to its forecasts, the EU predicted that the eurozone economy would grow by 1.6% in 2016, down 0.1 points from its expectations made three months ago. Growth is forecast at 1.8% in 2017, also a 0.1 point trim to previous predictions.
Inflation is seen languishing at an average annual rate of just 0.2% this year before picking up to 1.4% next year. That is down from the EU's last forecasts for 0.5% and 1.5%, respectively. Low inflation is a sign of weak economic activity, and the European Central Bank is tasked with keeping it just under a 2% rate.
The EU warned that global economic uncertainty was such that predictions were especially hard to make. Mr Moscovici mentioned the risk of slower growth in countries such as China, and political uncertainly in many parts of the world that could have an immediate impact on Europe.
On the plus side, unemployment in the eurozone is expected to fall from 10.9% in 2015 to 10.3% this year and even dip into single digits, 9.9%, in 2017. Huge differences within the currency bloc remain, with Greece expecting a rate of 24.7% this year, Spain 20%, and Germany 4.6%.
Greece is facing a double challenge since it still is trying to lift itself from the depths of near bankruptcy while at the same time facing the brunt of Europe's migrant crisis.
EU finance ministers will next Monday resume a review of the country's progress on economic reforms that are required before more rescue loans can be paid out.
"They are in the frontline of the migration crisis," Mr Moscovici said. "This is why we will do everything we can to make sure an agreement is feasible."
The forecast said Greece showed "remarkable resilience" last year while "growth is expected to resume in the second half of 2016 and to pick up in 2017 thanks to the return of confidence and the impact of structural reforms."
Britain faces the biggest risk of all EU member states - with the possibility of leaving the EU following the June 23 referendum on continued membership.
The EU lowered the country's growth forecast since February from 2.1% to 1.8% for this year and from 2.1% to 1.9% next year, saying that "overall, risks to the outlook are tilted to the downside, reflecting less favourable external demand and uncertainty in the lead-up to the June referendum."