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GDP growth is projected to remain around 1¾ per cent in 2017 and 2018. Domestic demand will continue to lead the recovery, benefiting from accommodative monetary policy and, more recently, from welcome mildly expansionary fiscal policy. Exports are projected to strengthen, but at a moderate pace, in line with global growth. The unemployment rate will keep declining, but will remain high at around 9%. Inflation will pick up on the back of higher energy prices and narrowing slack, but will remain below the ECB target.
Monetary policy should remain supportive until inflation is clearly and durably rising towards the ECB target. Several countries have fiscal space that should be used to support demand, concentrating on measures that would raise long-term growth, notably public investment. Boosting private investment will require structural reforms to enhance competition and reduce barriers in services and product markets, lower the still high level of non-performing loans in many countries and foster non-bank financing. Confidence in the monetary union would also gain from further progress to complete the banking union.
The capacity of the euro area to adjust to trade shocks would be enhanced by strengthening re-training, guidance and job-search support for displaced workers. Increasing the focus of education policies on life-long learning would also help. Promoting R&D, upgrading workers’ skills and fostering a greater use of digital technologies would help firms to become more competitive.
Economic Survey of the Euro Area (survey page)
Economic Survey of the European Union (survey page)
The Economic Consequences of Brexit: A Taxing Decision (main web page with paper)