Euro Area Economy Sees Robust Growth
Robust economic growth of 0.6 percent can be expected in the first and second quarters of 2018, according to the ifo Institute (Munich), KOF (Zurich) and Istat (Rome). Growth will slow down marginally to 0.5 percent in the third quarter. The key drivers are investments, which will benefit from low interest rates, and rising capacity utilisation rates.
Investments will increase by 1.0 per cent, 0.9 percent and 0.7 per cent respectively over the first three quarters of 2018. Consumption by private households will also rise by 0.5 per cent initially, and by 0.4 per cent in the third quarter. Inflation will increase by 1.3 percent by annual comparison to 1.6 percent in the second quarter and 1.7 percent in the third quarter.
The risks to the forecast include rising interest rates in terms of investment and the appreciation of the euro for exports, as well as tensions in international trade after the tariff decisions taken by US President Donald Trump. Brexit, Italy’s election results and tensions in the Middle East could also have a negative impact.
The inflation forecast is based on the assumption that the Brent oil price is 66 US dollars per barrel and the Euro costs 1.23 Dollars.
Eurozone Economic Outlook
This quarterly publication is prepared jointly by the German ifo Institute, the KOF Swiss Economic Institute, and the Italian Istat Institute. The forecast results are based on consensus estimates building on common macroeconomic forecast methods by the three institutes. Details and graphs can be found in the right column.
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