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6 May 2015
EC economic forecasts confirm improving outlook for eurozone, but not Greece – ING
FXStreet (Barcelona) - Carsten Brzeski of ING, notes that the latest EC forecasts contributed to the current optimism about the Eurozone economy, while Greece remains an exceptional case, further adding that the size of an eventual third Greek bailout will likely be high.
Key Quotes
“The EC’s forecast joined the choir of optimism on the back of lower energy prices, low interest rates, the weaker exchange rate and some progress on structural reforms.”
“For the year 2015, the EC revised its GDP growth forecast upwards to 1.5%, from 1.3%. For 2016, the EC expects GDP growth to come in at 1.9%, somewhat below the ECB’s latest estimate. These estimates are more or less in line with our own growth forecasts.”
“Next week, we will know what these predictions were worth when the first quarter 2015 GDP growth data will be released. Chances are high that the Eurozone economy outperformed both the US and the UK for the first time in more than four years.”
“Despite all optimism, there is one country with still dire growth prospects: Greece. According to yesterday’s EC forecasts, the Greek economy will only grow by a meagre 0.5% this year, from an earlier expected 2.5%. Remember that the growth rate of 2.5% was a basic assumption in the second bailout package.”
“However, the EC is still optimistic that the Greek government will get its act together and new growth-enhancing reforms will be implemented. Otherwise, it would not expect the Greek economy to accelerate with 2.9% next year.”
“Another dire aspect of the EC’s forecasts for Greece is the fiscal forecasts: with 2.1% of GDP, the primary surplus will be much lower than the required path of 4.5%. As a result, Greece’s debt-to-GDP ratio will increase above 180% this year.”
“In our view, this fiscal arithmetic should increase the size of an eventual third bailout package for Greece.”
Key Quotes
“The EC’s forecast joined the choir of optimism on the back of lower energy prices, low interest rates, the weaker exchange rate and some progress on structural reforms.”
“For the year 2015, the EC revised its GDP growth forecast upwards to 1.5%, from 1.3%. For 2016, the EC expects GDP growth to come in at 1.9%, somewhat below the ECB’s latest estimate. These estimates are more or less in line with our own growth forecasts.”
“Next week, we will know what these predictions were worth when the first quarter 2015 GDP growth data will be released. Chances are high that the Eurozone economy outperformed both the US and the UK for the first time in more than four years.”
“Despite all optimism, there is one country with still dire growth prospects: Greece. According to yesterday’s EC forecasts, the Greek economy will only grow by a meagre 0.5% this year, from an earlier expected 2.5%. Remember that the growth rate of 2.5% was a basic assumption in the second bailout package.”
“However, the EC is still optimistic that the Greek government will get its act together and new growth-enhancing reforms will be implemented. Otherwise, it would not expect the Greek economy to accelerate with 2.9% next year.”
“Another dire aspect of the EC’s forecasts for Greece is the fiscal forecasts: with 2.1% of GDP, the primary surplus will be much lower than the required path of 4.5%. As a result, Greece’s debt-to-GDP ratio will increase above 180% this year.”
“In our view, this fiscal arithmetic should increase the size of an eventual third bailout package for Greece.”