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Euro zone growth seen higher - but no champagne yet

The euro zone economy is set to grow in the coming year thanks to a weaker euro, cheaper oil and the European Central Bank's quantitative easing program, according to the European Commission's latest forecast. However unemployment and the threat of deflation continue to drag on the region.

Publishing its winter economic forecast, the European Union's executive body predicted gross domestic product (GDP) to grow 1.3 percent in the 19-country single currency region in 2015, raising its previous forecast of a 1.1 percent expansion made in November. For the European Union as a whole it forecast growth to rise to 1.7 percent in 2015.

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It believed growth would accelerate further in 2016, and that annual growth should reach 2.1 percent and 1.9 percent respectively. The forecasts come ahead of fourth quarter GDP figures from the euro zone due next Friday. Third-quarter numbers showed the region's economy grew just 0.2 percent.

The commissioner for economic and financial affairs, taxation and customs, Pierre Moscovici, said Europe's economic outlook was a little brighter today than when the commission presented its last forecasts.

"The fall in oil prices and the cheaper euro are providing a welcome shot in the arm for the EU economy," he said in the commission's report.

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Too early to celebrate

The former French finance minister added that the recent decision by the ECB to launch a bond-buying program had provided a "more supportive backdrop for reforms and smart fiscal policies" but warned "there is still much hard work ahead to deliver the jobs that remain elusive for millions of Europeans."

Unemployment and deflation continue to be bugbears for the euro zone too. While the current unemployment rate stands at 11.4 percent as of December, albeit having fallen slightly from the previous month, the region is mired in a deflationary environment, caused in part by the global decline in oil prices but also by lower consumer demand.

While "a protracted period of very low or negative inflation would also be detrimental to the growth outlook" the commission said that on the positive side, "certain factors could lead to a stronger-than-expected boost to global and EU growth stemming from low energy prices."

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Aside from deflation, the commission listed geopolitical tensions, central banks around the world taking diverging monetary policy decisions, and incomplete implementation of structural reforms as adding uncertainty to the current economic outlook.

- By CNBC's Holly Ellyatt, follow her on Twitter . Follow us on Twitter: @CNBCWorld