In its latest global economic outlook, BNP Paribas said it expected the “solid start” to 2015 to continue throughout the rest of the year and into 2016.
The substantial decline in oil prices, the boost to competitiveness from the weaker euro and the rise in consumer confidence stemming from European Central Bank (ECB) quantitative easing will all combine to boost the region’s economy, the report said.
“The structural reforms implemented in many countries in response to the debt crisis have also started to pay-off,” BNP Paribas said.
However a number of headwinds, such as persistently high public and private debt make the positive outlook for Europe look fragile, said the report.
“Alongside Greece’s woes, the biggest risk to our view is external. The slowdown in global growth, especially in emerging markets, at the turn of the year could prove more enduring than we envisage, hitting eurozone exports,” BNP Paribas said.
Inflation is likely to have bottomed out in the eurozone and will likely increase progressively over the next few months thanks to “energy-related base effects”, said the report.
“We expect core inflation to remain more muted, however, as the large amount of economic slack, the adjustment still underway in a number of countries and persistently low inflation expectations continue to damp prices.
“The ECB staff projections assume a steeper increase in core inflation and we see a high risk of these expectations being undershot,” BNP Paribas said.
