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Eurozone growth at fastest pace in 10 years

10 November 2017

The EU economy as a whole is also forecast to beat expectations and reach robust growth rates of 2.3 pct this year (up from growth forecasts of 1.9 pct in the spring).

With a 3.1 percent growth this year, Spain is one of eurozone's most dynamic countries, and it should soon be able to exit the deficit procedure it has been under since 2009.

In its Autumn Forecast report, the Commission said Ireland's GDP will then slow to 3.9 percent in 2018 and 3.1 percent in 2019. Beyond 2017, the EC predicts eurozone and overall European Union growth of 2.1 percent in 2018 and 1.9 percent in 2019.

Hungary's government targets GDP growth of 4.1% this year and 4.3% next year.

Real GDP in Greece rose by 0.5 pct (q-o-q) in both the first and second quarters of this year (in seasonally-adjusted terms), corresponding to a rise of 0.6 pct (y-o-y) for the first half of 2017. "The government deficit is moving closer to balance but risks to the fiscal outlook remain".

Private consumption is believed to become the main driver of growth on the back of an increasing population and growing disposable income; with domestic demand playing a secondary role to external demand.

"The government's fiscal stimulus this year - supported by stronger exports, a significantly depreciated Turkish lira in comparison with last year and a strong boost from public finances and other policy incentives, meant to restore confidence in the Turkish economy", the bloc's economic report said.

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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.

"We see good news on many fronts, with more jobs being created, rising investment and strengthening public finances", said Moscovici, who also highlighted concerns over high debt levels and a lack of wage growth.

Wages are expected to improve as the increase in labour supply slows down.

The Commission expects an export recovery in the second half of this year, after somewhat weaker results in the second quarter, thanks to high external demand and further integration into European Union markets.

Unit labour costs are projected to rise faster than the euro-area average in 2018 and 2019.

The labour market performed better than expected, with the unemployment rate dropping to 21 pct in July, down from an annual average of 23.6 pct in 2016.

The current account surplus is forecast to be close to 10% of GDP for 2017, pushed by strong growth in exports, especially service, and a drop in imports related to the contraction in investment. Core inflation, which excludes energy and unprocessed food prices, by contrast, has been rising but remains subdued, reflecting the impact of a prolonged period of low inflation, weak wage growth as well as remaining labour market slack.

Eurozone growth at fastest pace in 10 years