Economy

European Union cuts United Kingdom growth forecasts due to Brexit uncertainty

This, coupled with a tourism boom and strong consumer sentiment indicators, suggests that the Croatian economy is maintaining strong growth in the second half of the year, pushing the expected GDP growth rate in 2017 to 3.2%, the Commission said.

However, the risk of the United Kingdom losing its position as the main euro-clearing centre, worth some £1.1bn to the economy, could signal a setback which sparks firms to move operations to Europe.

The commission's figures suggest that by 2019, United Kingdom economic growth will have slowed to just 1.1%, slower than Italy, Spain and Greece.

The 19-country eurozone will grow by 2.2 percent in 2017, its fastest pace in a decade, the European Commission said in its autumn economic forecasts.

However, in the new forecasts, the growth rate rose to 3.2 percent, as since the summer months, industrial production and retail trade sharply increased.

The European commission enters key Brexit talks with the government with the eurozone economy in its best shape for a decade and activity in the United Kingdom weaker than expected six months ago.

The EU predicted these reforms would benefit the economy, with French growth to hit 1.6 percent this year, up from the earlier 1.4 percent. At the same time, more conservative savings behaviour by households could limit consumption, thus dampening real GDP growth. "We expect only the most critical issues - such as air travel - to be resolved by March 2019".

The surplus is expected to decline to 0.5% in 2018, once the 2018 budget measures are introduced, but should remain stable at the same figure in 2019, under a no-policy-change assumption.

The main reasons for this are positive macroeconomic and labour market conditions, high consumer demand and corporate profits, and money earned through Malta's citizenship scheme.

In spite of increases in social spending related to the budget measures (among which is an increase in pensions by €2 per week), current expenditure growth is projected to weaken and interest expenditure is set to marginally decrease.

Investment is expected to remain the most dynamic domestic component, with public investment enjoying a boost from the absorption of European Union structural funds.



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