The European Commission has downgraded European GDP growth for the next three years, amid fears of global volatility.
The economic forecast from the EC puts eurozone GDP at 1.6 per cent this year, down from the previous forecast of 1.7 per cent. It predicts a rise to 1.8 per cent next year, down on the 1.9 per cent predicted previously. GDP was 1.7 per cent last year.
Growth across the European Union, including non-euro countries, has also been downgraded, to 1.8 per cent this year and 1.9 per cent next year, down from 2 per cent last year.
The commission said that while fiscal policy is likely to support an increase in investment in the area, GDP will be hit by a rebounding oil price and a more uncertain global outlook.
Among the global risks identified by the Commission are slower emerging market growth sparking a spillover into developed markets, geopolitical tension, sudden moves in the oil price, and the potential for the UK to leave the EU.
Valdis Dombrovskis, vice president for the commission, says: “The economic recovery in Europe continues but the global context is less conducive than it was.
“Future growth will increasingly depend on the opportunities we create for ourselves. That means stepping up our structural reform efforts to address long-standing problems in many countries – high levels of public and private debt, vulnerabilities in the financial sector or declining competitiveness.”
Pierre Moscovici, commissioner for economic and financial affairs for taxation and customs, says that Europe needs to address growth inequalities between member states.
“The recovery in the euro area remains uneven, both between member states and between the weakest and the strongest in society. That is unacceptable and requires determined action from governments, both individually and collectively,” he adds.