Eurozone growth looks steady, says S&P

By Gokhan Kurtaran

LONDON

Global momentum has lifted the Eurozone's economic prospects and it appears to have reached cruising altitude, Standard & Poor’s (S&P) said on Wednesday.

“The economic and monetary union closed 2017 on a high note, with GDP growth at 2.5%, its fastest pace in a decade,” the credit rating agency S&P said in a press release.

“The general fall in sentiment surveys at the start of 2018 indicates that eurozone growth is leveling off. Firms are increasingly reporting that supply constraints, rather than demand, are a drag on output. Nonetheless, for now, we expect the growth momentum will stay solid, thanks to the broad-based economic expansion and strong domestic fundamentals,” it said.

S&P also said that strong fundamentals in the eurozone suggest that economic expansion will continue at a brisk pace and the rating agency raised its GDP growth forecasts for the region to 2.3 percent this year and 1.9 percent in 2019.

Noting that dollar's weakness would persist, the credit rating agency also raised euro-dollar exchange rate forecast to $1.27 in 2018 and $1.3 in 2019.

“The current growth cycle appears to have peaked, but the remaining slack in the labor market and productivity rebound will keep inflationary pressures in check until the end of 2019.”

S&P noted that the inflation will likely remain subdued this year and credit rating agency expects European Central Bank (ECB) to only gradually wind down its asset purchase program from September until the end of this year.