Economic recovery in the eurozone
is continuing but at a slower rate than expected, the European
Central Bank (ECB) said in its monthly bulletin published on
Thursday.
"The economic recovery in the euro area is continuing,
albeit with lower than expected growth at the beginning of the
year on the back of a weaker external environment," the bank
said.
"Looking ahead, the economic recovery is expected to
proceed at a moderate pace," it added.
"Domestic demand should be further supported by the ECB's
monetary policy measures and their favourable impact on
financing conditions, as well as by continued employment gains
from past structural reforms," the bank continued.
"Overall, insufficient demand remains the single most
important factor holding back services business at the euro area
level, but other factors play a role at country and sub-sectoral
level," the ECB said.
"For example, factors limiting services business that are
reported comparatively often by market services firms are
financial constraints in Italy and shortage of labour in
Germany," it added.
The ECB also noted the significant appreciation of the euro
exchange rate over the three months under review.
"The euro appreciated markedly in effective terms between
early December2015 and mid-February 2016 amid the increase in
global uncertainty," the bank said.
"In bilateral terms, the euro appreciated by 3.4% against
the US dollar over the same period" while "uncertainty
surrounding the United Kingdom's referendum on EU membership
weighed on the pound sterling, resulting in the euro
appreciating by 9.3%".
The euro also appreciated strongly against the Russian
rouble, the Chinese renminbi and the currencies of emerging
market economies and commodity-exporting countries, the ECB
continued.
"Higher volatility and the decline in risk appetite
supported the Japanese yen, leading to a euro depreciation
against the Japanese currency by 5.4%," it said.
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