by Shuai Rong
BRUSSELS, June 7 (Xinhua) -- As the eurozone economy grew to the highest rate for 12 months in the first quarter, experts said the eurozone economic recovery trends would likely to continue steadily but without spectacular growth, and the risks would mainly come from political ones such as the upcoming referendum in Britain.
Eurostat said on Tuesday the eurozone economy grew by 0.6 percent in the first quarter, up from the most recent estimation of 0.5 percent and the highest rate for 12 months, supported by household spending and private sector investment.
This growth rate was faster than those of the United States and Britain, which were respectively reported as 0.2 percent and 0.4 percent.
"For the moment, the Eurozone current recovery trends are likely to continue, so steady but not spectacular growth, propped up by very accommodating monetary policy," said Fabian Zuleeg, the chief executive of Brussels-based think tank the European Policy Centre.
"For the eurozone economy recovery, the baseline scenario is stable, with low goals but stable ... and then there is lots of risks," said Guntram B. Wolff, director of Brussels-based think tank Bruegel and former official in the European Commission.
Experts said low oil prices, the relatively low exchange rate of the euro, very ample monetary policy and slightly supportive fiscal policy also continue to underpin the growth this year.
The 0.6 percent growth in the first quarter was mainly supported by household spending and private investment. The jump in household spending was partly because of the lower energy prices, which leave consumers with more money to spend on other goods and services.
But the boost from cheap oil is set to gradually fade as energy prices rebound. That means the pace of private consumption growth, the main motor of growth so far, is projected to slow down somewhat next year.
To boost economic recovery, the European Central Bank (ECB) has announced a series of massive stimulus measures since the start of last year when a massive trillion-euro asset purchases program, dubbed as quantitative easing, was launched.
The European Commission has also launched Juncker Investment Plan to boost investment rate across the union, with a prediction to generate a total of 315 billion euros (about 359 billion U.S. dollars) of investment in three years through leverage and co-financing.
"All of these policies to boost investment are useful but not sufficient. We also need an increase in public investment to create the framework for private investors," Zuleeg said.
His view was echoed by Guntram B. Wolff, "With the help of ECB policy, the inflation will pick up very slowly. Even the core inflation without oil price is not very high now," Wolff said. "I think ECB policies are effective but it's not enough. ECB may need more support from government."
"Juncker investment plan is a good start but it doesn't have enough actual resources been put in there, that why it not make much huge difference to investment numbers," he added.
Regarding the economic growth risks, Zuleeg said the main risks are political, such as the upcoming referendum in the UK.
"The key issue for the EU is the inter-relatedness of crises, for example the Greek debt issue is linked to the position of Greece in the front line of the refugee crisis," he added.
Holding the same view as Zuleeg, Wolff said the risks are mostly the political risks, otherwise he foresaw a steady recovery but without very high growth numbers.
ECB President Mario Draghi said last week in a news conference that the economic growth of the second quarter this year may be weaker than that of the first quarter.
"Looking ahead, we expect the economic recovery to proceed at a moderate but steady pace," he said.
"The economic recovery in the euro area continues to be dampened by subdued growth prospects in emerging markets, the necessary balance sheet adjustments in a number of sectors and a sluggish pace of implementation of structural reforms," he added.
According to the European Commission's latest economic forecast on May 3, the economy was expected to rise 1.6 percent in the eurozone and 1.8 percent in the EU in 2016, both 0.1 percentage points lower than projected three months ago.
Eurostat said last Tuesday the eurozone inflation was estimated to be at minus 0.1 percent in May, slightly up from the minus 0.2 percent in the previous month.
The commission forecast inflation in the eurozone would stand at 0.2 percent in 2016 and 1.4 percent in 2017. It also warned that risks associated with domestic EU developments remained considerable, with regards to the pace of implementation of structural reforms and the uncertainty ahead of Britain's EU referendum.
