Where Global markets had showed its strength in recent time with majority of developing nations and developed nations posted reasonably good growth numbers which is an indication of recovery in global market which may continue in 2018 the economy of Euro Zone economy is going to see a turnaround in 2018 where the major decision of Brexit domestically and US tax reform are going to affect the economy big time.
Here are few positive and negative aspects which are going to affect the growth in Eurozone economy in coming years including positive development to increase employment numbers, reconciling stance by central bank on monitory policy and recovery in global markets and few negative aspects also which may give a threat to economic growth
Rising Employment:
The members of Eurozone had worked on various policies and reforms to support the labor market condition and to maintain healthy employment numbers which had shown its results in recent times. There are various labor market reforms down the line which are going to introduce to help the current labor market condition and to create an equal and growth-oriented tax structure which will, in turn, increase the private consumption.
The increase in private consumption on the back of favorable labor market condition is expected to support the GDP growth in the coming year and it will play a key role in the economic growth of Euro Zone despite the challenges of few member countries in this sector.
Favorable financing conditions are also going to play a very important role in the labor market development. Fixed business investments are expected to grow above 3.5 percent in 2018 thanks to recovering corporate bank landing, this overall scenario will build a positive environment for growth in domestic demand and employment generation as well which will benefit the Eurozone economic growth.
Adaptive Monitory Policy:
By keeping in mind the risk of deflation in Eurozone the current stance of ECB on the Monitory policy front is looking reasonable. The current adaptive monitory policy stance is well suited to the present economic conditions and looking forward the European Central Bank is going to gradually decrease its expansionary Monitory policy which had played its role in the development in Euro Zone by keeping low-interest rates to encourage borrowings with boosted the money supply in the economy as the future prospect of the health of Eurozone economy is looking prosperous.
However by keeping in mind the deflation risk the ECB is expected to start its quantitative easing program next year and possibly implement its interest rate stabilizing process after the gradual tapping of its Asset purchase program.
Recovering Global Economy:
Global Economy had shown its strength in recent times. Majority of developing nations posted good growth numbers with developed nation’s steady growth momentum. The outlook for Global Economy will remain positive in 2018 on the back of a positive trend in financial markets worldwide with a supportive landing system to encourage the growth of business and large-scale industries. The Biggest economy in the world US is also set to introduce a massive tax reform which will, in turn, make a big change in the corporate world in the biggest economy. There positive reforms and policies are going to play a very important role in 2018 and that makes us believe that the year 2018 will be a good year in term of global economic growth. The recovery in the global market is expected to support the growth in Eurozone as well by increasing the exports due to higher global demand.
Negatives:
The year of 2018 is going to be a very important year for the European economy as a very important decision over the BREXIT is going to be happen in later October this year along with the US tax reform settlement where both of the internal and external factors are going to affect the economy for longer period of time 2018 is going to be a very exciting year ahead which will give a direction to European economic growth. Also, the concerns over the North Korea and increasing tension between the US and North Korea is giving a strong threat to the global economy.
The Euro:
Euro is the second largest and most traded reserved currency in the world and Euro V/S USD is the most popular curry pair for forex traders all over the world. The changes and development in the Euro Zone the currency Euro which is the official currency of EuroZone is expected to surge in 2018. The strength of Euro is widely anticipated by the traders all over the world on the back of the increasing strength of EuroZone economy front.
The pair EUR/USD is expected to reach the level of 1.3500 levels after breaking the resistance zone near 1.2700 levels. However, the movement of USD due to the tax reform and FOMC stance on interest rates are going to play an important role in the movement of the pair and it might find it difficult to cross the resistance of 1.2700 levels in coming months.
Bottom line:
The European economy is expected to continue its performance in 2018 as well. Despite the uncertainty over the big BREXIT decision which is still hurting the consumer confidence and businesses the European economy manages to give a healthy gross domestic product growth rate of 2.6% in the third quarter of 2017 and it is expected to post good growth rates in the last quarter of 2017 as well as in the whole 2018 year supported by various factors including sustained global recovery and boost in the European exports and good employment numbers.
We forecast the Eurozone GDP growth to reach 2.0% levels slightly higher form the European Banking Federation forecast on the back of the strong economic stance in domestic front as well as the growing support environment global economy. However political uncertainty in the Eurozone due to Brexit and increasing tension over the North Korean growing nuclear power are going to play a very big role in the economic growth and that will remain a point of concern in 2018.
