Country Economic Forecasts > Eurozone

Recent economic news has struck a reasonably positive tone and we continue to think that external weakness will not cause any lasting damage to the wider economic recovery. For now, there is little hard data available for Q4, but the strength of the survey data suggests that the recovery may regain a little bit of momentum this quarter. Indeed, in November, the composite PMI was around its highest level of the year.And given ongoing improvement in the fundamentals, we see investment growth picking up to 2.3% next year, with a further acceleration to over 3% in 2017. This should make the recovery more sustainable. As a result, we maintain our view that GDP growth will pick up from 1.5% this year to 1.8% in 2016 and 2017. Meanwhile, although the ECB's deposit rate cut and the extension of its QE programme announced in December were seen as disappointing by the markets, they were broadly in line with our own forecasts. We now expect inflation to be close enough to target in early 2017 for the ECB to terminate the programme in March 2017. We think that December's actions will be the last major policy easing by the ECB in this cycle.