The European Commission will today release its spring economic forecast, a seasonal outlook of the European economy’s expected performance over the next few years.
Today’s forecast comes days after data showed Europe’s economy grew by 0.4% in the first three months of the year, beating expectations and the 0.2% growth recorded in Q4 2018. That translates to 1.5% annualised growth, matching the previous forecast in winter.
The European Commission will likely hold its annualised growth estimate steady at 1.5%, or possibly even revise it upward in anticipation of a strong second half of the year.
To be sure, there are issues of concern for the Commission. Italy’s budget deficit will once again be in the spotlight. Europe’s fourth largest economy emerged from recession last week, but today’s forecast will show the country’s budget deficit at 2.4% of GDP—well above the 2% target agreed with Brussels last December.
With Rome reluctant to increase taxes and reduce public spending—policies necessary to bring the deficit down—it could be set for another showdown with Brussels. Specifically, the European Commission may initiate an Excessive Deficit Procedure, which could see Italy fined up to $10 billion. Such an action likely won’t come until after this month’s European elections, but could see Euroscepticism in Italy rise nonetheless.
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Alex is a senior analyst in the Current Developments team with a primary focus on the Americas. He also serves as an editor on The Daily Brief.