Economists Forecast Eurozone Growth

April 23, 2015Europe/Middle Eastby EW News Desk Team

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Analysts predict that the Eurozone economy will gain traction as consumers have more money to spend from low oil prices, among other factors like the funds flooding the market from the ECB’s asset-purchase program. Economists expect per-quarter growth of 0.4 percent until 2016, including an annual growth rate of 1.4 percent for 2015 and 1.6 percent for 2016.

Not all economists agree on the Eurozone's track to recovery, but the positive forecast serves as a morale boost for struggling economies throughout the European Union, and many banks foresee positive output as well. Experts expect oil prices to remain low in 2016, giving more consumers the power to pump money back into EU economies. The ECB's QE policy instills market stabilization and investor confidence. The asset-purchase program consists of buying 60 billion euros each month in government bonds until 2016 or until inflation lowers to manageable levels.

European Exports

Another factor that gives EU economies hope is a weak euro, which benefits European exporters. Further, a weakened exchange rate will strengthen export capacity for the second part of 2015, lasting throughout 2016. The euro embarked on a sharp downturn since the middle of 2014. Experts forecast a 5.9 percent hike in exports in 2015 and 4.9 percent in 2016.

The Greece Factor

Greece's potential exit from the euro may threaten Eurozone recovery, including the global economy as a whole. Currently, Greece struggles to pay public workers, and the country needs more aid to pay back one billion euros to the International Monetary Fund. Greece owes money to the IMF and ECB for the 2010 and 2012 bailout.

Many fear a Greek exit would lead to a departure of other countries, particularly in southern Europe. Others fear market destabilization within European markets, even a full break-up of the EU monetary system. However, ECB President Mario Draghi has gone on record in alleviating such concerns. On the other hand, some say Greece leaving the euro would be best for all parties involved, and Europe could manage the impact.

The Missing Piece

Politicians and bankers fail to mention the issue of structural reform. Southern European nations bear the brunt of the EU economic crisis, but Spain is an example of one nation in the region commencing long-term reforms that created more businesses in the country in 2014. Spain issued such changes as allowing companies to conduct business more easily in different regions and around the world, along with giving companies greater autonomy over wages and other internal operations. The ECB's asset program is crucial, but leaders throughout Europe should focus primarily on such factors as wage growth and business reform.