EU Commission likely to revise down Eurozone 2017 growth forecast

The European Union Commission is due to release its Autumn 2016 Economic Forecasts tomorrow, which would be used as the basis for the thorough assessment of the 2017 Draft Budgetary Plans. The European Commission, in particular, would be assessing the fiscal measures announced by the EU governments in their draft budget bill, noted Societe Generale in a research report.

Any fault or possible drift between the 2017 government commitment and the EC estimate might push the European Commission to require corrective action. The EC applies the 2017 Draft Budgetary Plans with their own projection and assessment of the measures’ efficiency. This would give some insight into the required fiscal tightening to meet the 2017 targets.

Portugal, Spain and Italy are expected to be the main focus; however, in all, a neutral fiscal stance is expected at the euro area aggregate level, stated Societe Generale. From growth prospective, the European Commission would take the outcome of the Brexit referendum into account.

Even if the economic surveys do not indicate towards a deceleration, the EU Commission is expected to revise down its growth projections for the next year, which at present is at 1.8 percent. The EC is likely to make slight changes to the inflation outlook as compared to the spring report, added Societe Generale.