OREANDA-NEWS. The economy in the eurozone has continued to develop positively since the beginning of the year. The gross domestic product increased by 0.4% in the first quarter, still mainly driven by domestic demand. Each of the five largest economies – Germany, France, Italy, Spain and the Netherlands – has been contributing to economic growth again, for the first time since 2010. KfW Research expects the recovery to continue and confirms its economic forecasts of 1.3% for 2015 and 1.8% for 2016.

“We are finally seeing a return to growth on a broader basis in the eurozone. While this is encouraging for the future, it is not an occasion for excessive euphoria with regard to the economic trend,” says Dr J?rg Zeuner, Chief Economist at KfW. Although companies have benefited from the weak euro exchange rate, and falling unemployment rates and the low oil price add momentum to consumer spending, the efforts of states and corporations to reduce debt continues to prevent stronger growth from materialising. Furthermore, economic growth is still constrained by high unemployment in the eurozone, despite recent improvements, and by a slowing global economy.

Nevertheless, exports could provide a positive surprise for growth in the eurozone. KfW Research expects export dynamics to pick up slightly during the course of the year, as soon as the devaluation of the euro shows its full effect on foreign demand. A substantial increase in exports would lead to faster improvements in the labour market and, as a knock-on effect, add impetus to consumer spending and private investment. Greece continues to be fraught with great uncertainty with regard to economic downside risks.