The European Commission on Thursday (9 November) gave an optimistic view of the EU economy, saying that it is "on track to grow at its fastest pace in a decade this year".
The Commission also raised its growth forecast for next year to 2.1 percent from 1.8 percent.
With current surveys already suggesting that heightened uncertainty is weighing on business investment in the United Kingdom, the EC report forecast investment growth will weaken in 2018, as many firms are likely to continue deferring investments in the face of uncertainty.
However, Pierre Moscovici, the commissioner for economic and financial affairs, warned that while both the eurozone and the wider European Union are expected to grow in 2018 and 2019, "challenges remain in the form of high debt levels and subdued wage increases".
This repeated last year's pattern, when the EC repeatedly revised its estimate for Bulgaria upwards and, in the end, the actual gross domestic product growth figure ended up exceeding the final forecast by 0.1 percentage point, reaching 3.4 per cent growth.
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"After five years of moderate recovery, European growth has now accelerated".
With the latter in mind, the European Commission revised its growth forecasts for the United Kingdom, cutting projected 2017 growth to 1.5 percent from 1.8 percent and forecasting a further slowing down in 2018 and 2019 respectively.
The government deficit is moving closer to balance but risks to the fiscal outlook remain, it said.
"The European economy has performed significantly better than expected this year, propelled by resilient private consumption, stronger growth around the world, and falling unemployment", the Commission said in a statement.
Wages are expected to improve as the increase in labour supply slows down.
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"While market reactions to recent events in Catalonia have remained contained, the risk exists that future developments could have an impact on economic growth", the Commission noted in its reports, adding that the size of the impact "cannot be anticipated at this stage". Yet challenges remain in the form of high debt levels and subdued wage increases.
The improving economic outlook reflects a broader global economic upswing that is stoking investments by European Union companies as political and economic uncertainties dim.
Moscovici, the French member of the Commission, said the decision over closing the procedure will be taken in spring 2018.
The main factor behind this year's growth is set to be external demand, with domestic demand coming in second because of a significant contraction in investment.
The EC warned that Hungary's labor market is becoming "increasingly tight" and said price pressures are expected to grow over the forecast horizon.
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Despite the pick up in growth, Europe's unemployment rate is expected to be 8.5% next year - double the rate in the UK.
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