European Commission raises economic growth forecasts

The European Commission has raised its economic growth forecasts, citing improving labour markets, "particularly high" sentiment and a stronger-than-expected pick-up in global activity and trade.

Economic expansion in the 19-country eurozone and 28-member European Union will be 2.3% this year and 2% in 2019, it said in statement on Wednesday.

That compares with November estimates for 2.1% and 1.9%, respectively.

"Europe's economy has entered 2018 in robust health," said Pierre Moscovici, commissioner for economic and financial affairs, taxation and customs.

"The euro area is enjoying growth rates not seen since before the financial crisis."

He added: "Unemployment and deficits continue to fall, and investment is at last rising in a meaningful way.

"Economic growth is also more balanced than it was a decade ago. Provided we pursue smart structural reforms and responsible fiscal policies, it can also be more durable."

Risks to the forecasts "remain broadly balanced", the Commission said.

Growth may exceed expectations in the short term because of sentiment.

Downside risks include uncertainty over the outcome of negotiations about the UK's withdrawal from the EU in 2019, geopolitical tensions and a shift towards more inward looking and protectionist policies, it said.

The Commission said economic growth in both the EU and eurozone last year was 2.4%, the fastest pace in a decade.

Core eurozone inflation, which excludes energy and unprocessed food prices, will be 1.5% this year and 1.6% in 2019, the Commission forecast.

The European Central Bank has been buying assets, running at €30 billion a month, to bring eurozone inflation up to its target of below but close to 2%.

Under its quantitative-easing programme, the ECB buys bonds, which brings money into the financial system and lowers interest rates.

Consumers and businesses can thereby borrow more at lower costs, and their spending and investments should increase.

That, according to the ECB, should take the inflation rate closer to its goal.

The ECB has said it will continue to buy assets until the end of September "or beyond, if necessary – and, in any case, until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim".