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EU interim forecast: coming out of the recession but uncertainty remains high

As global conditions improve, signs for an immediate economic recovery are increasing – but may not prove lasting

Article written on 14.09.2009.

The Commission published its latest interim economic forecasts on 14 September 2009. The underlying message is that signs for an economic recovery are apparent, also thanks to strong policy interventions, but the sustainability of the recovery remains to be tested.

The Commission sees signs of an imminent economic recovery and fears of a prolonged and deep recession are fading. GDP growth is set to turn positive in the second half of the year. However, the forecast for 2009 as a whole remains unchanged as the previous estimates for 2008 and the first quarter of 2009 proved weaker. GDP is expected to fall by 4% in both the EU and the euro area this year.

The improved economic outlook reflects external conditions being increasingly favourable. Recent data for trade and industrial production, as well as business and consumer confidence, are generally encouraging. The resilient private and public consumption and advancements in the inventory cycle will also support growth in Europe.

Table 1: Real GDP growth
 
Quarterly GDP forecast
(%, quarter-on-quarter)
2009
Annual GDP forecast
(%, year-on-year)
2009
 
2009/1
2009/2
2009/3
2009/4
Spring forecast
May 2009
Interim forecast
Sep. 2009
Germany
-3.5
0.3
0.7
0.1
-5.4
-5.1
Spain
-1.6
-1.1
-0.4
-0.2
-3.2
-3.7
France
-1.3
0.3
0.4
0.3
-3.0
-2.1
Italy
-2.7
-0.5
0.2
0.1
-4.4
-5.0
Netherlands
-2.7
-0.9
-0.4
0.0
-3.5
-4.5
Euro area
-2.5
-0.1
0.2
0.1
-4.0
-4.0
Poland
0.3
0.5
0.1
0.0
-1.4
1.0
United Kingdom
-2.4
-0.7
0.2
0.5
-3.8
-4.3
EU27
-2.4
-0.2
0.2
0.1
-4.0
-4.0


Note: the quarterly figures are working-day and seasonally adjusted, while the annual figures are unadjusted


The rate of consumer-price inflation declined in the first half of 2009 driven mostly by the base effects of past hikes in energy and food prices. Inflation seems to have reached a trough of 0.2% in July in the EU (-0.7% in the euro area). Inflation rates are projected to increase towards the end of the year as base effects reverse and commodity prices are on the rise. For the year as a whole, the outlook for consumer-price inflation remains unchanged at 0.9% in the EU for 2009 (and 0.4% in the euro area).

Table 2: Consumer price inflation
 
Quarterly HICP forecast
(%, year-on-year)
2009
Annual HICP forecast
(%, year-on-year)
2009
 
2009/1
2009/2
2009/3
2009/4
Spring forecast
May 2009
Interim forecast
Sep. 2009
Germany
0.8
0.2
-0.2
0.6
0.3
0.3
Spain
0.5
-0.7
-0.8
0.9
-0.1
0.0
France
0.7
-0.2
-0.6
0.2
0.2
0.0
Italy
1.4
0.9
0.1
1.1
0.8
0.9
Netherlands
1.8
1.6
-0.1
1.2
1.4
1.1
Euro area
1.0
0.2
-0.3
0.7
0.4
0.4
Poland
3.6
4.3
4.2
3.3
2.6
3.8
United Kingdom
3.0
2.1
1.3
1.1
1.0
1.9
EU27
1.6
0.9
0.3
0.9
0.9
0.9



Looking into next year, uncertainty is rife also due to the influence of temporary factors. The full impact of the economic crisis on labour markets and public finances is, at least partly, still to be faced.

Risks to the outlook appear broadly balanced. While the strength of the recovery could surprise on the upside in the near term, its sustainability is yet to be tested – and will be considered in the upcoming fully-fledged forecast in which all countries are assessed over a forecast horizon that includes 2011 (planned for 3 November).

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.


Interim forecast, full textpdf(270 kB) Choose translations of the previous link  (270k


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