Euro-zone economic outlook

In the fourth quarter 2014, economic activity is expected to confirm the moderate expansion rate registered in the third quarter (+0.2%).

In Q1 and Q2 2015, GDP is expected to expand modestly by 0.3%, mainly driven by domestic demand. The recovery in the labour market is expected to be gradual and private consumption is sustained by modest wage dynamics and low inflation. The latter was further cut down by the recent drop in the oil price, resulting in a moderate increase of real disposable income.

Investment is forecast to recover, sustained by the acceleration of internal and external demand, helped by more favourable financing conditions. Under the assumptions that the oil price stabilizes at 56 US$ per barrel and that the dollar/euro exchange rate fluctuates around 1.21, headline inflation is expected to bottom out in Q1 2015 and then slowly increase in Q2.

Key upside risks are a further depreciation of the euro and a greater fall in oil prices that is expected to provide a stronger stimulus to internal and external demand. On the downside, risks are related to the outcome of the parliamentary elections in Greece and its possible consequences on the stability of the Eurozone