EU interim forecast: Fragile recovery in progress

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EU interim forecast: Fragile recovery in progress

The European Commission expects GDP in the EU to recover gradually, while still facing strong headwinds.

25/02/2010

Interim forecast full document pdf - 517 KB [517 KB]


The Commission published its latest interim economic forecasts on 25 February 2010. The underlying message of this update of GDP and inflation variables is that the EU economy is recovering, but still facing headwinds. The updated projections include France, Germany, Italy, the Netherlands, Poland, Spain and the United Kingdom, accounting for 80% of EU GDP.

The Commission has revised slightly upward the growth projections for the first half of 2010. However, the projected growth rate for the whole of 2010 remains mainly unchanged at 0.7% in both the EU and euro area.

This update is based on a global recovery in the second part of 2009 that proved stronger than expected. This is due especially to an uptake in Asia. World GDP excluding the EU did not shrink in 2009 and is expected to grow by some 4¼% in 2010. However, what impact the world uptake will have on EU growth remains to be seen.

The EU is benefitting from improved sentiment indicators, but industrial production and retail sales figures amongst others have been less promising, and investments remain weak. Equally, financial markets have recovered in 2009 but uncertainties remain. Adding a probable weak labour market outlook dampening demand, and many of the growth sources being of temporary nature, the robustness of the EU recovery is yet to be tested.

 

 

The strong disinflation process over most of 2009 was mainly explained by downward base effects from the energy and food components and by a growing slack in the economy. Inflation continues to remain at a very moderate annual rate of 1.0% in the EU and 0.3% in the euro area, as expected in the autumn for 2009. In 2010 price stability is expected to be maintained, with inflation projections being only marginally revised upwards to 1.4% in the EU and staying unchanged at 1.1% in the euro area.

The risks to the EU growth outlook for 2010 still appear broadly balanced. On the downside, the situation of financial markets remains highly uncertain, while on the upside, the stronger global recovery, and the imminent turning of the inventory cycle in the EU may have a greater impact on domestic demand than currently anticipated.

The Commission usually publishes economic forecasts four times a year – comprehensive spring and autumn forecasts and smaller interim forecasts in February and September. The Commission's interim forecast is based on updated projections for France, Germany, Italy, the Netherlands, Poland, Spain and the UK – together accounting for some 80% of the EU’s GDP.

The next fully fledged forecast is due in May 2010.

 

Last update: 24/11/2010 | Top