Forecast Gains in European Growth Momentum

Staff economists at the European Central Bank have become markedly more optimistic about European growth prospects over the past few months. They are forecasting a mean GDP expansion of 1.5% in 2015 increasing to 1.9% and 2.1% in the following two years. As recently as December, they had been expecting 1.0% in 2015 and 1.5% in 2016. The more optimistic tone has come from lower oil prices, a weaker currency helping competitiveness and the impact of the ECB’s monetary policies. The staff is more optimistic than the non-official consensus which is also on the rise. Overnight, a quarterly survey of 59 European forecast professionals completed in the first week of April showed a mean growth expectation of 1.4% in 2015 rising to 1.8% in 2017, increases of between 0.1 and 0.3 percentage points from a quarter earlier. Resource sector investment strategy is a constant search for growth momentum. These forecast revisions signal rising confidence about the future that has hitherto been absent. It is still not enough but is a welcome move in the right direction.