Investing.com – The European Union (EU) Commission cut growth and inflation forecasts for the euro area on Tuesday based on the weak outlook for global growth.
In the so-called Spring 2016 Economic Forecast, the EU Commission cut its projection for 2016 gross domestic product (GDP) to 1.6%, from the 1.7% estimated in the Winter Forecast.
It also reduced the outlook for the euro area in 2017 to growth of the 1.8%, from the prior 1.9%.
“Economic growth in Europe is expected to remain modest as key trading partners' performance has slowed and some of the so far supportive factors start to wane,” the EU Commission said in the report.
The Commission further noted that the outlook for global growth remained weak pointed to considerable risks surrounding the European economy.
“External risks include the possibility that slower growth in emerging markets, particularly China, could trigger stronger spillovers or turn out worse than expected,” the Commission explained, adding that uncertainty linked to geopolitical tensions, abrupt moves in oil prices or financial market turmoil also farmed part of the external rinks.
“Additionally, risks associated with domestic EU developments remain considerable, as for instance with regards to the pace of implementation of structural reforms and the uncertainty ahead of the UK’s EU referendum,” the report added.
With regard to inflation, the EU Commission cut its forecast for 2016 to 0.2%, from the prior 0.5%, and also reduced its projection for 2017 to 1.4%, compared to the previous 1.5%.
"It is expected that inflation remains close to zero in the near term as energy prices are lower than a year ago," the Commission said.
"External price pressures are also weak amid a slightly appreciating euro and rather subdued global producer prices," it added.