EY, formerly known as Ernst & Young, perceived several positive factors at work in the 19-country single currency area, a region that has struggled to recover from the global financial crash and its own subsequent sovereign debt crisis.
EY said that "growing exports and rebounding domestic demand mean that capacity constraints are emerging in a number of sectors" and also predicted a boost to loan demand and capital investment, which should "grow by around 2.5 percent a year." It also predicted that consumption would "remain robust" with consumer spending to grow 1.6 percent in 2016 although it said "the temporary boost from lower energy prices will fade."
Governments in the euro zone -- particularly the recipients of financial bailouts such as Portugal, Spain, Ireland and Greece -- have pursued programs of deep austerity measures and spending cuts in order to cut their deficits and debt piles. There have been calls for governments to start to increase spending, however, in order to boost lackluster growth. EY believed that 2016 could see investment start to grow and then accelerate.
"With emergency austerity measures now largely in the past, governments should start to ease their capital budgets. After falling for six straight years up to 2015, we expect public investment to grow by 0.4 percent in 2016 and then gather pace to 3.2 percent by 2018, before easing gradually thereafter. More generally, current government spending will continue to recover, albeit to a pace well short of the pre-crisis era," EY said.