Eurozone GDP recovery to be moderate in the near term - institutes

10 January 2014 18:36  [Source: ICIS news]

LONDON (ICIS)--Eurozone GDP is expected to recover only "moderately" in the first half of 2014, with little job creation, three European economics institutes said in a joint forecast on Friday.

Italy’s Istat, France's Insee and Germany’s Ifo forecast 0.2% eurozone GDP growth in Q1 2014 and 0.3% growth in the second quarter. For the 2013 fourth quarter, the institutes expect growth of 0.2%.

The eurozone would rely more on domestic demand in the near term, gradually shifting away from external economic growth drivers, the institutes said.

Continued tight fiscal policy in many eurozone member states together with persistent "labour-market slack" would lead to only limited private consumption growth, the institutes said.

However, investment is forecast to increase, partly due to the need to "renew production capacity after a marked phase of adjustment", they said.

Eurozone inflation should remain below 2.0%, assuming an oil price of $110/bbl and a dollar exchange rate of $1.36 to the euro.

On the upside, growth could be higher if investments – led by improved access to credit – should be stronger than forecast, the institutes said.

The key downside risk is a stagnation in private consumption because of continued labour market weakness and weaker external demand in emerging economies, they said.

Paul Hodges studies key influences shaping the chemical industry in his Chemicals and the Economy Blog

By: Stefan Baumgarten
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