The eurozone has recorded its highest annual growth rate for a decade, from the strong recovery of the financial crisis and the expectation that the European central bank will further scale back its support for the economic crisis.
The European commission said the euro zone rose by 0.6 per cent in the third and fourth quarters of last year, ahead of the us and UK. The annual growth rate of 2.5 per cent in 2017 is the highest since 2007, up from 1.8 per cent last year. The us grew by 2.3% last year and Britain by 1.8%.
With economic growth taking root in the region and investment levels finally surpassing pre-crisis highs, the euro zone’s recovery will be fully expanded in 2017. ECB officials will withdraw some emergency support this year in response to signs that the expansion could continue without a 2.3 trillion euro bond-buying program.
Economic growth looks set to remain strong in 2018, and the European commission’s economic confidence survey, released on Tuesday, also showed that confidence is still close to a 17-year high of December 2017.
In the French presidential and parliamentary elections, a more favourable political climate, led by the victory of Emmanuel macron, fostered confidence. Gross domestic product rose 1.9 per cent last year, the highest since 2011, according to data released on Tuesday. Capital spending – a sign of confidence – grew 3.7 per cent, up from 2.7 per cent last year.
Corporate investment in the eurozone’s second-largest economy has risen to its highest level in a decade. “After years of pressure from companies, we’re starting to see animal spirits re-emerge,” said Frederik Ducrozet, senior European economist at Pictet Wealth Management. “This should go on.”
Mr Macron approved tax cuts for entrepreneurs and investors, as well as Labour reforms designed to make the job market more flexible. Last week, Mr. Macron received about 3.5 billion euros in investment commitments from business leaders.
Economists said, however, the French data to improve also comes from 2014 Macron socialist predecessor francois hollande (FrancoisHollande) launched a pro-business reforms, and since 2012 the European central bank’s loose monetary policy, the policy is to keep the French public debt interest rates at record lows.
“France has always been the last country to need QE and to benefit most from it,” Mr. Ducrozet said.
Euro zone data in the fourth quarter were in line with economists’ expectations, slightly lower than the 0.7 per cent in the third quarter.
The Spanish economy is the fourth largest economy in the currency area, with growth of 3.1 per cent between the fourth quarter of 2016 and the fourth quarter of 2017. The government’s early estimates of German growth in Berlin suggest that the euro area’s biggest economy grew by 2.2% last year.
Italy held elections on March 4th, but did not report growth in 2017, but remains one of the slowest-growing economies in the euro zone. The European commission estimates that Italy will grow by 1.5% last year.