THE WIDER ECONOMY
The projections presented in this chapter have been compiled from the EBF Spring 2018 Economic Outlook, a bi-annual report prepared by the European Banking Federation’s Chief Economists’ Group. European Commission data for previous years.
Supported by the European Central Bank’s (ECB) accommodative monetary policy stance, a strong global economy and robust domestic demand, and despite political uncertainty and geopolitical tensions surrounding the world economy, the euro area grew by 2.4% in 2017.
This was a higher rate than international partners such as Japan (1.7%) and the UK (1.8%) and comparable to the US (2.3%), but lower than Canada (3%) and China (6.9%).
In 2018, the 19-country bloc will continue to benefit from supportive financial conditions, sustained global and domestic demand, and robust growth of global economy. While political uncertainty in Europe is less of a threat than in previous years, geopolitical tensions and the possible escalation of trade conflict remain downside risks. The euro area is expected to expand, above potential, by 2.4% in 2018. The growth is expected to slacken slightly in 2019, when GDP expansion of 2.1% is forecast. The Euro area however has a lower expected growth rate for 2018 and 2019 than the EU 28 and the US.
Domestic demand will remain the key driver for the expansion of the euro area economy, as it has been over the last few years, running on the two engines of private consumption and investment, and sustained by job creation, slow return of inflation and improved profitability.