Economic recovery in the eurozone is set to continue in the coming months, but not as fast as hoped owing to global uncertainties and slowing growth in emerging economies, the European Central Bank said Thursday. "The economic recovery in the euro area is continuing, albeit with lower than expected growth at the beginning of the year on the back of a weaker external environment," the ECB wrote in its latest economic bulletin.
Recovery "continues to be dampened by subdued growth prospects in emerging markets, volatile financial markets, the necessary balance sheet adjustments in a number of sectors and the sluggish pace of implementation of structural reforms," it said.
"Growth in China continues to slow, with negative spillovers to other emerging economies, particularly in emerging Asia, and commodity-exporting countries need to adjust further to lower commodity prices." In this context, the euro's exchange rate has increased against other currencies in recent months, which squeezes the competitiveness of European exports. At the same time, domestic demand in the 19 countries that share the euro, which has been a key pillar of recovery in recent months, "should be further supported by the ECB's monetary policy measures and their favourable impact on financing conditions, as well as by continued employment gains from past structural reforms", the central bank argued.
"Moreover, the low price of oil should provide additional support for households' real disposable income and private consumption, as well as for corporate profitability and investment." In a bid to kick-start the eurozone economy, the ECB cut its key interest rates at its most recent policy meeting two weeks ago, extended its asset purchase programme known as QE and said it will make massive amounts of cheap liquidity available to banks.
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