The eurozone's economic recovery will gather pace this year and the next, though inflation is expected to remain below the European Central Bank's target of just below 2% over the medium term.
Euro area's economy is estimated to have expanded at its fastest pace in more than a decade in 2017, growing 2.4% during the year, compared with the European Commission's autumn forecast of a 2.2% GDP growth. The higher reading reflects an improving labor market, high consumer and business confidence and a pickup in global economic activity and trade.
The commission also raised its GDP growth forecast to 2.3% from 2.1% for 2018 and to 2.0% from 1.9% for 2019. The expected gradual withdrawal of policy stimulus, the uncertainty around the Brexit transition agreement and the emergence of supply-side constraints are set to weigh on economic activity.
Inflation is expected to be 1.5% in 2018, compared to 1.4% previously predicted, and projected to increase to 1.6% in 2019, in line with the prior estimate. Annual inflation in the euro area declined to 1.3% in January 2018 from 1.4% in December 2017, according to a flash estimate from Eurostat.
The commission said the possibility of tighter global financing conditions and the potential of a sharp correction in financial markets pose downside risks to the growth outlook.
Equity markets have been volatile in recent days as fears of inflation and rate hikes led to a global sell-off.
