European Union raises Turkey's growth forecast

The report suggests a deal could be completed by November 2018

The report suggests a deal could be completed by November 2018

The 19-member eurozone is expected to grow at its fastest pace in a decade this year, with gross domestic product growth beating forecasts and projected to reach 2.2%, well outpacing the United Kingdom, according to a European Commission report released on Thursday.

According to the forecast, GDP growth in the European Union will be 2.3 percent this year, and 1.9 percent next year.

With current surveys already suggesting that heightened uncertainty is weighing on business investment in the United Kingdom, the EC report forecast investment growth will weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.

France and Spain will cut their budget gaps enough this year and next to meet deadlines set by European Union finance ministers and Italy's public debt will finally peak this year and start falling from 2018, the European Commission forecast on Thursday. This is substantially higher than that expected in the spring forecast for 2017 (1.7 pct).

Hungary's government targets GDP growth of 4.1% this year and 4.3% next year.

From 2018, the European Commission will revert to publishing two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year, instead of the three comprehensive forecasts in winter, spring and autumn that it has produced each year since 2012.

"Economic growth in the United Kingdom has been slowing since the start of the year, as higher consumer prices constrained private consumption growth", the commission report said.

In 2017, the government balance is projected to remain in surplus, at 0.9% of GDP.

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The surplus is expected to decline to 0.5% in 2018, once the 2018 budget measures are introduced, but should remain stable at the same figure in 2019, under a no-policy-change assumption. "Growth should remain strong and broad-based this year".

Job creation has been sustained and labour market conditions are set to benefit from the domestic-demand driven expansion, moderate wage growth, and structural reforms implemented in some Member States.

Wage growth grew moderately for the first half of 2017, even though the unemployment rate was very low, and skill shortages increased.

The European Commission raised its growth projections for the euro area as domestic demand propels economic growth amid improving labor market conditions and strong global growth.

However, overall current revenue growth is predicted to slow down next year, due to expected lower income from the citizenship scheme.

The delay in closing the second review on the programme, earlier this year, is a "major explanation", Moscovici said, as consumption and investment were "hit more than we had expected" by uncertainty over negotiations between Athens and its creditors.

Unit labour costs are projected to rise faster than the euro-area average in 2018 and 2019.

Once the labour supply increase becomes more moderate, wage growth is forecast to improve.

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