European Economic Forecast - Uni Ulm Aktuelles

1 Economic and Financial AffairsAutumn 2017 ISSN 2443-8014 (online) European Economic ForecastINSTITUTIONAL PAPER 063 | NOVEMBER 2017 European ECONOMYE uropean Economy Institutional Papers are important reports analysing the Economic situation and Economic developments prepared by the European Commission's Directorate-General for Economic and Financial Affairs, which serve to underpin Economic policy-making by the European Commission, the Council of the European Union and the European Parliament. Views expressed in unofficial documents do not necessarily represent the views of the European Commission.

2 LEGAL NOTICE Neither the European Commission nor any person acting on its behalf may be held responsible for the use which may be made of the information contained in this publication, or for any errors which, despite careful preparation and checking, may appear. This paper exists in English only and can be downloaded from Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): 00 800 6 7 8 9 10 11 (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). More information on the European Union is available on Luxembourg: Publications Office of the European Union, 2017 KC-BC-17-063-EN-N (online) KC-BC-17-063-EN-C (print) ISBN 978-92-79-64710-9 (online) ISBN 978-92-79-64709-3 (print) (online) (print) European Union, 2017 Reproduction is authorised provided the source is acknowledged.

3 For any use or reproduction of photos or other material that is not under the EU copyright, permission must be sought directly from the copyright holders. European Commission Directorate-General for Economic and Financial Affairs European Economic Forecast Autumn 2017 European ECONOMY Institutional Paper 063 ABBREVIATIONS ii Countries and regions EU European Union EA euro area BE Belgium BG Bulgaria CZ Czech Republic DK Denmark DE Germany EE Estonia IE Ireland EL Greece ES Spain FR France HR Croatia IT Italy CY Cyprus LV Latvia LT Lithuania LU

4 Luxembourg HU Hungary MT Malta NL The Netherlands AT Austria PL Poland PT Portugal RO Romania SI Slovenia SK Slovakia FI Finland SE Sweden UK United Kingdom JP Japan US United States of America CIS Commonwealth of Independent States EFTA European Free Trade Association EMU Economic and Monetary Union MENA Middle East and North Africa ROW Rest of the World Economic variables and institutions CCCI Composite Credit Cost Indicators CPI Consumer price index EONIA Euro Overnight Index Average ESI Economic Sentiment Indicator GDP Gross Domestic Product GNI Gross National Income HICP Harmonised Index of Consumer Prices NAWRU Non-Accelerating Wage Rate of Unemployment NPL Non-performing loan PMI Purchasing Managers' Index VAT Value-Added Tax iii ECB European Central Bank IMF International Monetary Fund OECD Organisation for Economic Cooperation and Development OPEC Organisation of the Petroleum Exporting Countries WTO World Trade Organisation Other abbreviations EAPP Expanded Asset Purchase Programme FDI Foreign Direct Investment NFC

5 Non-Financial Corporations OCA Optimal Currency Area Graphs/Tables/Units bbl Barrel bn Billion bp. /bps. Basis point / points H Half lhs Left hand scale mn Million pp. / pps. Percentage point / points pt. / pts. Point / points Q Quarter q-o-q% Quarter-on-quarter percentage change rhs Right hand scale tn Trillion y-o-y% Year-on-year percentage change Currencies EUR Euro ECU European currency unit BGN Bulgarian lev CNY Chinese yuan, Renminbi CZK Czech koruna DKK Danish krone GBP Pound sterling HUF Hungarian forint HRK Croatian kuna ISK Icelandic krona MKD Macedonian denar NOK Norwegian krone PLN Polish zloty RON New Romanian leu RSD Serbian dinar SEK Swedish krona CHF Swiss franc JPY Japanese yen RMB Renmimbi TRY Turkish lira USD US dollar CONTENTS v Overview 1 PART I: EA and EU outlook 7 Continued growth in a changing policy context 9 1.

6 Putting the Forecast into perspective: convergence and the Economic outlook 10 2. External environment 18 3. Financial markets 23 4. GDP and its components 26 5. The current account 40 6. The labour market 41 7. Inflation 45 8. Public finances 49 9. Macroeconomic policies in the euro area 52 10. Risks 55 PART II: Prospects by individual economy 71 Member States 73 1. Belgium: Growth gaining momentum 74 2. Bulgaria: Stable growth supported by domestic demand 76 3. The Czech Republic: Swift growth risks draining labour market 78 4.

7 Denmark: Solid growth with domestic headwinds 80 5. Germany: Robust growth ahead 82 6. Estonia: GDP growth seen calming after 2017 surge 84 7. Ireland: Rapid growth to continue 86 8. Greece: Return to growth 88 9. Spain: Strong, balanced growth set to continue 90 10. France: Solid growth, lower unemployment 92 11. Croatia: Growth proves resilient but risks persist 94 12. Italy: Recovery is strengthening in the short term 96 13. Cyprus: Growth surprises on the upside 98 14. Latvia: Investment recovers remarkably 100 15. Lithuania: GDP growth to moderate after surging in 2017 102 16.

8 Luxembourg: Sustained, broad-based growth 104 17. Hungary: Maturing cycle driven by domestic demand 106 18. Malta: Current account and budget balance surpluses cement 108 19. The Netherlands: Strong growth performance to continue 110 20. Austria: Strong growth dynamics supported by domestic demand 112 21. Poland: Solid growth driven by domestic demand 114 22. Portugal: Growth and employment to perform strongly 116 23. Romania: Consumption-led growth 118 24. Slovenia: Broad-based expansion 120 25. Slovakia: Growth strengthens, the labour market tightens 122 26. Finland: Strong growth as external demand picks up 124 27.

9 Sweden: A thriving economy 126 28. The United Kingdom: Slowdown in growth expected to continue 128 vi Candidate Countries 131 29. The former Yugoslav Republic of Macedonia: Recovery ahead as investor confidence returns 132 30. Montenegro: Rebalancing growth drivers 134 31. Serbia: Consumption to sustain Economic growth momentum 136 32. Turkey: A risky path to sustainable growth 138 33. Albania: Growth set to be increasingly driven by private consumption 140 Other non-EU Countries 143 34. The United States of America: Solid near-term momentum as cycle continues to mature 144 35. Japan: Temporary growth spurt driven by policy stimulus 146 36.

10 China: Solid growth but key structural challenges remain 148 37. EFTA: Solid near-term prospects as growth converges to trend 150 38. Russian Federation: Cyclical rebound fading as structural rigidities kick in 153 Statistical Annex 157 LIST OF TABLES 1. Overview - the autumn 2017 Forecast 1 International environment 19 Composition of growth - Euro area 30 Composition of growth - EU28 31 Labour market outlook - euro area and EU28 42 Inflation outlook - euro area and EU28 46 General Government budgetary position - euro area and EU28 50 Euro area debt dynamics 51 LIST OF GRAPHS Real GDP, euro area 9 HICP, euro area 9 Dispersion of real GDP per capita (coefficient of variation) 11 Real convergence in the euro area ( -convergence)