Country Economic Forecasts > Eurozone

Recent developments outside the Eurozone, in China in particular, have added to concerns that external weakness could undermine the ongoing recovery. However, for now at least, these negative developments are being offset by further improvements in the health of the domestic economy.Although industrial and trade data suggest that the struggles faced by the externally-focused sectors of the economy in Q3 continued into Q4, recent developments suggest that the Eurozone recovery has gained momentum. Both the composite PMI and the EC's Economic Sentiment Indicator posted multi-year highs in Q4, and picked up as the quarter progressed, which bodes well for growth prospects in both Q4 2015 and Q1 this year. As a result, we still expect GDP growth to pick up from 1.5% in 2015 to 1.8% this year and next.But with our oil price forecast reduced again, we have lowered our inflation forecast for the Eurozone to 0.7% from 1% last month. Although this has perhaps raised the chances that the ECB may announce further changes to its QE programme, deflation is still very much a tail risk so we still think that the December policy measures will be the last major easing by the ECB in the current cycle.