Brexit woes: European Commission slashes United Kingdom growth forecasts

The 19-country eurozone will grow by 2.2 percent in 2017, its fastest pace in a decade, the European Commission said in its autumn economic forecasts.

With the latter in mind, the European Commission revised its growth forecasts for the United Kingdom, cutting projected 2017 growth to 1.5 percent from 1.8 percent and forecasting a further slowing down in 2018 and 2019 respectively.

The pace is the quickest in a decade, and the European Commission said it anticipates continued growth of 2.1 percent next year and almost 2 percent in 2019.

Eurozone growth is then expected to slow to 2.1% in 2018 and 1.9% in 2019. The highest growth this year will be achieved by Romania with 5.7 percent, followed by Malta with 5.6 percent, Ireland 4.8 percent and Slovenia 4.7 percent.

By contrast to the slowing United Kingdom economy, the rest of Europe will continue to grow robustly, carrying on the strong levels of economic expansion seen over the previous year or so. The bloc also cut its United Kingdom 2017 economic growth forecast to 1.5% from 1.8% while keeping it steady at 1.3% for next year.

"The external sector is expected to remain solid, supported by an improved external environment, especially in the euro area", the Commission said in its section on Luxembourg.

In line with robust real GDP growth and a strong labour market, and despite the reduction in taxation worth 0.2% of GDP, tax revenues are expected to continue growing.

Domestic demand remains the primary driver of growth.

Private consumption is expected to recover after a weak performance in the first half of 2017, mainly because more residents were in employment. Moreover, structural convergence and the strengthening of the euro area are necessary to make it more resilient to future shocks and to turn it into a true motor of shared prosperity.

The Commission expects an export recovery in the second half of this year, after somewhat weaker results in the second quarter, thanks to high external demand and further integration into European Union markets. Over the next two years, unemployment is set to decrease further to 8.5% in 2018 and 7.9% in 2019. Members of the common-currency are seen with an average deficit of 1.1% of GDP in 2017, down from 1.4% in the earlier forecast. Moreover, there is a risk of a possible under-execution of the public investment budget in 2018, which would hinder overall investment growth as well.

The general government headline deficit is projected to further deteriorate to 3.5% of GDP in 2017 from 3.0% in 2016, due to numerous fiscal easing measures. The EC publishes such forecasts three times a year.

"Under this assumption, GDP growth is still expected to remain subdued at 1.1%".

This, the Commission said, is for "forecasting purposes only and has no bearing on the talks underway" in the context of the Brexit talks, which resumed Thursday.

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