Euroarea economic growth likely to accelerate to 1.9 pct in 2017

The global economic environment has rebounded in the second half of last year. A stable rise in prices of commodity since the first quarter of 2016 indicates towards a widespread cyclical rebound, while the IMF projects the global economic growth to accelerate in 2017 as well. Within this environment, exports are likely to give a positive impetus to growth in the euro area, especially in Germany, noted Erste Group Research.

Growth of close trading partners such as Italy and France are also expected to gain from this in 2017. Overall, the euro area economy is anticipated to expand 1.7 percent in 2016 and accelerate to 1.9 percent this year, added Erste Group Research. Several elections scheduled for 2017, Italy’s ailing banking sector and the anticipated start of Brexit negotiations are the main downside risks for the above mention economic outlook.

In the euro area, core inflation has fluctuated around the 1 percent level since mid 2014. Prices of energy have steadied in the recent months and recently entered an upward trend. For headline inflation, the negative pressure put by energy prices would continue to fall, which would result in the headline inflation to probably accelerate to 1.3 percent in 2017 from 0.2 percent in 2016, added Erste Group Research.