European Union hikes growth outlook, but warns of risks

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Unemployment in the euro area was projected to drop to 9.4 percent this year and to 8.9 percent next year, thus marking the lowest level since the start of 2009. In its first set of economic forecasts since the United Kingdom government triggered its exit from the European Union, the Brussels-based commission said that risks to the currency bloc's economy have become more balanced, though they remain tilted to the downside.

"Europe is entering its fifth consecutive year of growth", EU Economics Commissioner Pierre Moscovici said.

That is compared with estimates made in February of 1.6 percent and 1.8 percent, respectively. "A further slight increase is expected in 2017, also due to the additional resources earmarked for the public support to the banking sector and retail investors".

"It is good news too that the high uncertainty that has characterised the past twelve months may be starting to ease".

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The British economy is set to expand by 1.8 percent in 2017, up from the 1.5 percent forecast three months ago. The commission expects GDP to grow by 4 per cent in 2017 and 3.6 per cent in 2018.

The news was especially positive for non-euro Britain which would continue growing healthily despite the unknowns of Brexit, the Commission said.

Italy remains however a potential source of risk, for its weak banks and high unemployment which fuels the rise of euroskeptic parties as elections approach.

Referring to the figures for 2016, when real GDP grew by 5.2 per cent, the commission's spring economic forecast said "some of the impressive headline figures are still heavily distorted by the activities of multinational enterprises in the country". "The debt-to-GDP ratio is forecast to decline to 132.5% in 2018". However, it reports that the labour market's better-than-expected performance, combined with continued robust wage growth and improving household balance sheets, will support consumption in 2017 and 2018. European Union rules say countries should keep their deficits below 3 percent of GDP. For 2018, it sees inflation at 1.3 percent, lower than the 1.4 percent foreseen earlier and below the ECB's goal of just below 2 percent.

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