European Commission Increases GDP Growth Forecast for Croatia

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The euro area economy is on track to grow at its fastest pace in a decade this year, with real GDP growth forecast at 2.2%. The surplus is projected to be 3.7 percent in 2019.

The EU raised the country's economic growth forecast for 2018 from 3.3 percent to 4 percent. For the next two years, the Commission forecasts decrease in employment growth to 0.4% and 0.3% due to limited labour supply. Contrary to May's forecasts, the Commission now expects the French deficit to remain under 3 percent in 2018 - at 2.9 percent.

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.

"After five years of moderate recovery, European growth has now accelerated", said Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs.

In 2017, the government balance is projected to remain in surplus, at 0.9% of GDP.

Growth has surpassed expectations according to the European Commission, as private consumption hits high and unemployment numbers gradually fail.

The report says that Ireland's 2018 Budget, which includes spending measures of around 0.4 per cent of GDP that are partly covered by revenue increases of 0.3 per cent, will still see the deficit fall to 0.2 per cent of GDP in 2018. "While the effects of recent tax reforms pale, household consumption is expected to remain strong thanks to job growth, wage increases and favourable credit conditions".

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Pierre Moscovici, the European Union commissioner for economic and financial affairs, said: "We have entered a new phase of the economic recovery, with stronger growth driven by resilient consumption, the global upswing, loose financing conditions and falling unemployment".

Throughout the European Union investment is picking up amid favourable financing conditions and considerably brightened economic sentiment as uncertainty has faded. Wage dynamics are still constrained and inflation dampened because of slow productivity growth and a slack in the labour market.

While recovery has taken place for 18 uninterrupted quarters, it remains incomplete and atypical, because of its dependence on policy support, the continuing presence of fiscal and financial fragilities stemming from the crisis, and the subdued strength of domestic demand compared to previous recoveries.

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

"Based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the United Kingdom, growth is still expected to remain subdued over the forecast horizon".

United Kingdom growth slowed down this year - to 1.5 percent from 2.3 percent in 2015 and 1.8 percent in 2016 - because higher prices led to lower consumption.