Stronger euro area domestic demand to lead the recovery in 2016

The economy is anticipated to expand by 1.5% in 2015, which would be at the high end of forecasts made at the start of the year. The growth rate is expected to rise to 1.8% in 2016 and 1.9% in 2017, supported by stronger domestic demand stemming in particular from private consumption which, in turn, will be supported by low inflation and further improvements in the labour market. 

Investment spending growth is also expected to pick up further, spurred on by favourable credit conditions and increasing confidence in the cyclical upturn. The fiscal stance could also be loosened to accommodate the refugee crisis. Finally, exports to countries outside of the euro area should benefit from the anticipated moderate improvement in global demand and past euro depreciation. 

Spanish growth may soften a little next year, following a strong 2015, but the pace of growth in Germany, France and Italy is expected to increase. Overall euro area growth, however, is still expected to underperform both the US and UK.