The Eurozone economic growth has been reduced by half in the second quarter of 2016. These are the first figures to be released after the UK’s decision to leave the EU – although Britain was never part of the Eurozone: those countries using the Euro as their national currency. For that reason, the UK is not part of these figures, even though it is still a member state of the European Union.
The group of 19 nations who are part of the Eurozone have avoided deflation. GDP for the EU increased by 0.3% in the second quarter of 2016. This is higher than what was hoped for, but 50% less than the first-quarter figure of 0.6%. The second-largest economy of the European Union, France, saw growth of 0.7% in the first quarter of this year, but no growth at all in the second quarter,
Inflation in the Eurozone increased by 100% between June and July, although these figures are 0.1% increased to 0.2%, and are a result of higher alcohol, food and tobacco prices. The unemployment rate in the Eurozone stands at 10.1%.
ING Bank chief economist, Peter Vanden Houte, is blaming Brexit for a ‘little acceleration’ in the economy, even though it still has ‘some momentum.’ It is certainly true that the UK vote to leave the EU will have some effect on the economy of the EU. However, Britain is still part of the European Union, and will likely remain so for the next two years during severance negotiations.
Regarding the EU in general, with the UK still in it, there was a slowdown in EU GDP to 0.4% in the second quarter from 0.5% in the first of this year. The Euro 2016 soccer tournament in France helped that country’s first-quarter growth. It was at the beginning of the year that people purchased tickets and booked accommodation. April to June growth reduced significantly. The second quarter was disappointing to France and to the EU in general.
In spite of this, France kept to its 1.5% forecast for GDP growth for the year. This appears to be very optimistic, and skeptics are asking what is to happen for France to reverse the trend and achieve 1.5% growth? The European Union Eurozone overall is unlikely to achieve even a third of that figure.
We shall find out what happens in a few weeks. An improvement in Eurozone economic growth is not expected soon in view of the uncertainty brought about by the UK’s impending exit from the EU, although the UK is not part of the Eurozone.
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