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In the winter, the EU executive predicted 2.1% growth for this year and 2.3% for the next for Estonia.

Real GDP growth in Estonia fell to 1.1% in 2015, from 2.9% in 2014. The fall reflects negative base effects in the electronics sector, sharply reduced demand from neighboring Russia, and low international oil prices which affect Estonia's shale oil sector, it is written in the forecast.

"Private consumption boomed, supported by strong wage increases, income tax cuts and the absence of consumer price inflation. At the same time, business investment activity fell considerably due to weak external demand and the completion of major energy sector investment projects," the Commission said.

Estonia's income level should soon start catching up again with the EU average as its real GDP is forecast to grow by 1.9% this year and by 2.4% in 2017. While the global outlook remains rather uncertain, regional demand is expected to grow, raising Estonia's capacity utilization to a point where businesses will need to invest. The large contribution of private consumption to growth will likely diminish in 2016 and 2017 as consumer price inflation picks up. Domestic demand, however, is projected to remain the main growth driver over the forecast horizon, it is written in the forecast.

The Commission expects Estonia's harmonized index of consumer prices (HICP) is to total 0.8% this year and 2.9% in 2017, while in February the indicators were to total respectively 1% and 2.5%. "The increase is set to be driven by higher excise tax rates, strong wage growth, sizeable annual minimum wage increases, and a gradual pick up in commodity prices," the Commission said.

The Commission forecasts that Lithuania's GDP growth will accelerate to 2.8% this year and to 3.1% next year on the back of strong private consumption and recovering exports.

According to the Commission's Spring 2016 Economic Forecast published on Tuesday, tightening labor market conditions and accelerating wage growth will drive inflation in Lithuania up to 0.6% in 2016 and to 1.8% in 2017 after 0.7% deflation in 2015.

The unemployment rate is expected to decline to 7.8% this year, from 9.1% in 2015, and ease further to 6.4% in 2017.

The EU's executive body forecasts that the improvement in Lithuania's public finances will stall this year.

The general government's deficit is forecast to widen to 1.1% of GDP in 2016 before narrowing to 0.4% in 2017. General government debt is expected to fall to 41.1% of GDP this year before increasing again to 42.9% next year.

The European Commission also warned that major member states France, Spain and Italy were on course to break the bloc's rules on public spending.

Warning of increased global risks for the 19-country single currency area as it continues its sluggish recovery, the Commission trimmed its 2016 forecast to 1.6% from 1.7%. The Commission also said that eurozone growth would accelerate to 1.8% growth next year, instead of the earlier forecast 1.9%.

Meanwhile, the European Commission predicted that Latvia's GDP will increase 2.8% this year.

"Growth in Europe is holding up despite a more difficult global environment," said EU Economic Affairs Commissioner Pierre Moscovici, who unveiled the forecast at a press conference in Brussels. "The recovery in the euro area remains uneven, both between member states and between the weakest and the strongest in society. That is unacceptable and requires determined action from governments, both individually and collectively."