EY Eurozone Forecast December 2014


EY Eurozone Forecast
& Outlook for financial services

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Crisis turning to recovery – but the Eurozone remains vulnerable

After a relatively encouraging first three quarters, the final months of 2014 have seen the pace of  recovery slow and a revival of fears about the Eurozone’s long-term future. We now forecast GDP growth of 0.8% this year, down from the 0.9%% projected in our September report. We expect growth to pick up to 1.2% in 2015 and 1.6% a year in 2016-18.

But despite the indisputable problems in the Eurozone, this edition of the EY Eurozone Forecast does find some reasons to be positive.

Growing exports, restored business confidence, rising domestic demand and an improving labor market should all support growth.

However, we are concerned about the Eurozone’s vulnerability, although it looks set to continue its recovery from the last crisis. With 12 Eurozone member states’ public debt above 90% of GDP, governments have minimal room for fiscal stimulus.

As Lithuania accedes to full membership on 1 January 2015, it joins a Eurozone whose recovery has ebbed in recent months. But despite this soft patch, we are confident the Eurozone will benefit from a number of positive tailwinds that will provide renewed momentum in 2015.

Becoming the Eurozone’s 19th member, Lithuania is well placed to adapt to Eurozone membership. It will become a more attractive destination for foreign investment and give the Baltics states a growing profile in the area.