EU Warns on Growth Threat From Brexit, US Policies; Raises Forecasts

Europe's economy is strengthening, the European Union said Thursday, raising this year's growth forecast, despite geopolitical risks that could undermine its fifth year of recovery.

Gross domestic product in the 28-country EU will grow by 1.9% in both 2017 and 2018, the bloc estimated in its latest economic outlook, up from its February forecast of 1.8%.

It raised its GDP forecast for the 19-member eurozone to 1.7% this year from its previous forecast of 1.6% and maintained its estimate of 1.8% economic growth in 2018.

"The high uncertainty that has characterized the past 12 months may be starting to ease," said Pierre Moscovici, the European commissioner for economic and financial affairs, taxation and customs. "Europe is entering its fifth consecutive year of growth, supported by accommodative monetary policies, robust business and consumer confidence and improving world trade."

But while some of the risks to the European economy are ebbing, geopolitical developments and a host of "elevated" uncertainties still pose threats, the EU's executive arm--the European Commission--said.

The thrice-yearly review comes on the heels of Emmanuel Macron's presidential victory in France on a business friendly and pro-EU platform and as centrist politicians across Europe appear to be beating back a populist backlash against the bloc, amid tepid economic growth.

EU officials said the eurozone's recovery from the global financial crisis of 2007-08 faced threats, such as negotiations over Britain's exit from the EU, China's economic adjustment and potential protectionist measures from U.S. President Donald Trump.

Still, they were optimistic about unemployment declining, cutting their 2017 forecast for the eurozone to 9.4% from 9.6% and for 2018 to 8.9% from 9.1%.

Unemployment in the broader EU is now seen at 8% this year and 7.7% in 2018--down from the 8.1% and 7.8% previously estimated.

The eurozone's inflation rate is seen slightly lower at the end of 2017, at 1.6%, rather than the 1.7% forecast in February. Consumer-price inflation is seen accelerating to 1.8% in 2018, in line with the EU's previous outlook.

Members of the common-currency area are seen with an average deficit of 1.4% of GDP in 2017, unchanged from the EU's earlier forecast. The gap is seen declining to 1.3% in 2018, down slightly from the previous estimate of 1.4%.

Write to Emre Peker at

(END) Dow Jones Newswires

May 11, 2017 05:12 ET (09:12 GMT)