-Ernst & Young
During June's policy meeting, the European Central Bank trimmed all three interest rates and extended its loan programmes. This week the ECB Vice-President Vitor Constancio claimed that the region is facing an insignificant risk of the protracted level of inflation. Moreover, he hinted on the potential introduction of the quantitative easing, with policymaker being unanimous in their commitment to use unconventional tools if needed.
At the same time, Ernst & Young offers a slightly more optimistic picture for the 18-nation bloc, saying the economy will expand 1.1% this year and accelerate to 1.5% in 2015. For 2016-18 the company expects growth around 1.6%. At the same time, exports are expected to improve by 3.5% and 3.8% this year and in 2015 respectively. Furthermore, activity in all sectors from manufacturing to non-market services is projected to strengthen next year. The labour market will still be a major problem for policymakers, as unemployment rate is expected to stand at 11.7% this year.
Regarding the main pain of the Eurozone, its inflation rate, the EY claimed the threat of deflation is mounting. The impact of a period of lost-lasting period of subdued inflation represent a serious challenge for companies that do not have enough differentiators that will allow them to sustain prices and maintain margins.
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