EY Eurozone Forecast: March 2015

Eurozone

EY Eurozone Forecast
& Outlook for financial services

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Cheap oil and support policy to drive the recovery

After a difficult second half of 2014, the Eurozone was in need of an encouraging start to the new year. And there are indeed some reasons to be cheerful..

Two key drivers have underpinned the upturn in fortunes:

  • Externally, oil prices hit a six-year low in January this year.
  • And, from within, the European Central Bank (ECB) quantitative easing (QE) program – weakening the euro and bringing bond yields down further – helped to allay fears of deflation and bolstered confidence more broadly.

The falling oil price will eventually translate into fuel savings for households throughout Europe, adding to consumer confidence that has already been improved by stabilizing levels of unemployment. The unemployment problem will be a stubborn one, however, and will act as a cap on domestic consumption for several years to come.

Businesses are also beginning to feel more optimistic. A number of business sentiment indices have been steadily rising in recent months, as the weaker euro and lower borrowing costs help to feed corporate confidence.

Amid a fast-changing business and economic environment, companies need to ensure they retain tight cost controls and continue to build agility into their operations. Responding to the Eurozone’s improving demand outlook has become an urgent priority and now is the time to reassess opportunities in the region and draw up new plans to make the most of them.

 


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