EC’s sober forecasts are still too optimistic

Last week’s EC Spring forecasts presented a pretty uninspiring picture of the euro-zone economy’s prospects. Despite the unprecedented degree of monetary policy support, growth is expected to slow this year and inflation to remain well below the ECB’s target.

But there is a danger that even this picture proves to be too optimistic as what the EC described as the “exceptional combination of favourable factors” supporting growth over the last year or so fades. We continue to expect euro-zone GDP to grow by little more than 1% this year.