The Eurozone’s gross domestic product (GDP) has strengthened to 0.4% quarter-on-quarter in Q1 of 2015, according to estimates by Eurostat, the Directorate-General of the European Commission.
The region has benefited from lower oil prices, a weakened euro and increased European Central Bank (ECB) stimulus in the form of quantitative easing (QE).
However, according to Howard Archer, chief European economist at IHS Global Insight, improved Eurozone growth and April’s exit from deflation will not cause any change in the ECB’s QE program – especially given the recent marked rise in bond yields and firming of the euro. The ECB will also see ongoing QE as important to lifting Eurozone inflation expectations further.
“The main message coming from the ECB at the moment is that it has no plans to end its QE programme early,” says Archer.
Investment across the Eurozone should also strengthen as 2015 progresses. Improved business confidence, a healthier economic backdrop, rising profitability, and easier credit conditions should provide increasing support to business investment although there will likely be little need to add capacity for some time to come in many countries.
However, the ever-looming Greece situation remains a factor in the Eurozone’s recovery, according to Archer. The country could weigh down on investor sentiment and growth if there is a default or even an ultimate exit from the Eurozone.
©2015 funds europe
