The 19-member eurozone is expected to grow at its fastest pace in a decade this year, with gross domestic product growth beating forecasts and projected to reach 2.2%, well outpacing the United Kingdom, according to a European Commission report released on Thursday.
With the growth forecast for 2017 slashed by 0.3 percent, it also expects the United Kingdom economy to only grow marginally over the next two years - by 1.3 percent in 2018 and by 1.1 percent in 2019, the year Brexit is now scheduled to happen.
Eurozone GDP growth has yet to catch up with the 3% expansion in 2007, before the global financial crisis hit. Under a no-policy-change assumption, the euro area general government deficit-to-GDP ratio is expected to fall to 0.8% in 2019 (1.1% in 2017 and 0.9% in 2018), while the debt-to-GDP ratio is forecast to decline to 85.2% (89.3% in 2017 and 87.2% in 2018).
The country will also start running a budget surplus of 0.9 percent next year in a sharp reversal of a budget deficit of 1.2 percent seen this year.
Despite this growth, the Commission states in its report that the Croatian GDP would return to the level before the crisis in two years.
The EU raised its 2017 Spanish GDP growth forecast to 3.1% from 2.8% while bumping its outlook for next year to 2.5% from 2.4% previously.
Revenue growth is supported by the favourable macroeconomic and labour market conditions, high corporate profits, consumer demand and the proceeds from Malta's citizenship scheme. Private consumption and household investment, supported by both government-initiated and market-driven wage increases, as well as a strong recovery in bank lending and further fiscal loosening, is expected to lift growth in 2018; however, growth is set to slow in 2019 as capacity constraints emerge, it added.
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Irish growth is close to the top of the European Union league with only Malta (5.6 per cent) and Romania (5.7 per cent) growing faster this year.
Moscovici, the French member of the Commission, said the decision over closing the procedure will be taken in spring 2018. The euro zone, meanwhile, is expected to grow by 1.7 per cent this year, an increase of 0.1 percentage points compared to the previous estimate.
"The European economy has performed significantly better than expected this year, propelled by resilient private consumption, stronger growth around the world, and falling unemployment", the Commission said in a statement.
A favourable relocation of financial services operators linked to the process of the United Kingdom leaving the European Union could also affect GDP growth, particularly in 2019.
The current account surplus is forecast to be close to 10% of GDP for 2017, pushed by strong growth in exports, especially service, and a drop in imports related to the contraction in investment.
Despite the pick up in growth, Europe's unemployment rate is expected to be 8.5% next year - double the rate in the UK.