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Growth of 0.4% forecast for euro area

The eurozone economy is on a recovery path, according to all but a handful of forecasters polled by Reuters who also gave a slightly more than one-in-four chance of Greece leaving the currency union.

Economists are more optimistic about a turnaround in the region compared with a month ago, which should provide some cheer given that for years a faltering eurozone has been one of the top risks to global growth.

GDP growth is expected to average a steady 0.4% per quarter until mid-2016, giving a 1.4% annual rate this year and 1.6% in 2016.

Although those numbers are largely unchanged from the March poll, 23 of 55 common banks which participated in both surveys moved annual predictions higher.

And 30 of 36 banks said the eurozone is now on a recovery path.

Much of this optimism can be attributed to more consumer spending power from lower oil prices and the launch of the ECB’s €60bn a month asset purchase programme.

Through that quantitative easing programme, which began in March, the ECB will buy mostly government bonds either until September 2016 or until inflation is back up to its target of around 2%.

“The real income boost from the lower oil price is having an immediate effect on consumer behaviour and that’s the main reason why we expect the growth rate to accelerate over the first half of this year,” said Ken Wattret, co-head of European market economics at BNP Paribas.

The euro currency, which has been weakening since mid-2014 with almost no break, also appears to have benefited the bloc, a net exporter of goods.

“We see the main transmission of the ECB policy as being the exchange rate and we expect the weakness in the exchange rate to stimulate a faster net export contribution to growth from the latter part of 2015 through into next year,” said Wattret.

Article Source: http://tinyurl.com/kbwqb42


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