In its Autumn forecast, the European Commission expects economic growth in Europe to continue at a moderate pace, as recent labour market gains and rising private consumption are being counterbalanced by a number of hindrances to growth and the weakening of supportive factors. In its autumn forecast released today, the European Commission expects GDP growth in the euro area at 1.7% in 2016, 1.5% in 2017 and 1.7% in 2018 (Spring forecast: 2016: 1.6%, 2017: 1.8%). GDP growth in the EU as a whole should follow a similar pattern and is forecast at 1.8% this year, 1.6% in 2017 and 1.8% in 2018 (Spring forecast: 2016: 1.8%, 2017: 1.9%).

The pacesetters will be Ireland (2016: 4.1%, 2017: 3.6%), Romania (2016: 5.2%, 2017: 3.9%), and Poland (2016: 3.1%, 2017: 3.4%), while Sweden (2016: 3.4%, 2017: 2.4%), and Spain (2016: 3.2%, 2017: 2.3%) after an excellent 2016 are expected to see their growth slow down next year.

Greece (2016: -0.3%, 2017: 2.7%), Italy (2016: 0.7%, 2017: 0.9%), Portugal (2016: 0.9%, 2017: 1.2%), and Finland (2016: 0.8%, 2017: 0.8%) are the laggards.

Germany and France are showing moderate growth, with growth figures around the EU average and Germany faring slightly better. UK is set to grow at 1.9% this year but uncertainties remain for 2017 due to Brexit.

Private consumption is set to remain the primary engine of growth through to 2018, supported by expectations for employment to continue growing and wages to pick up slightly. Borrowing costs remain supportive to growth due to exceptionally accommodative monetary policy. The euro area aggregate budget deficit is set to continue to edge down, while the fiscal stance is projected to remain non-restrictive. Investment is set to continue increasing.

However, political uncertainty (the relatively unexpected election of Republican candidate Donald Trump as US President may have unpredictable consequences on the EU economy), slow growth outside the EU and weak global trade weigh on growth prospects. Moreover, in the coming years, the European economy will no longer be able to rely on the exceptional support it has been receiving from external factors, such as falling oil prices and currency depreciation.

In short, the positive shocks which have positively influenced the EU will dwindle and the resilience of the EU economies in a less favourable environment is untested.

Going into more detail, employment in the euro area and the EU is expected to grow by 1.4% this year, faster than at any time since 2008, though slack remains in the labour market. Job creation is set to continue benefiting from domestic demand-led growth, moderate wage growth, as well as fiscal policy measures and structural reforms in some Member States. Employment growth is forecast to remain relatively solid, though slightly moderating in 2017 and 2018. Unemployment in the EU as a whole is set to fall from 8.6% this year to 8.3% next year and 7.9% in 2018. In the Euro area it is expected to decrease until 2018 to reach 9.2% which compares to a 2013 peak of 12%, but remains well above the 7.5% low reached in 2007.

Inflation in the euro area was very low in the first half of the year due to falling oil prices, but started to pick up in the third quarter as the impact of past price decreases began to wear off. Inflation should now climb moderately above 1%, as oil prices are assumed to rise. In the EU, inflation is forecast to rise from 0.3% this year to 1.6% in 2017 and 1.7% in 2018.

Finally, the current weakness of global trade outside the EU is weighing on euro area exports despite the resilience of intra-euro area trade. World trade, which has been exceptionally fragile this year, is expected to grow more slowly than GDP in 2016 before rising back in line with GDP growth in 2017 and exceeding it slightly in 2018. Imports are expected to grow faster than exports in the euro area. The euro area's current account surplus is forecast to decline over the forecast horizon.

The full report is available at the following link:http://ec.europa.eu/economy_finance/publications/eeip/pdf/ip038_en.pdf