GDP is forecast to contract by 0.3% in the EU and by 0.4% in the euro area this year. In 2013, economic growth is expected to gradually return, with some further strengthening in 2014.
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The consequences of the financial crisis continue to weigh on the short-term economic outlook for the EU and the euro area. According to the Commission's autumn forecast released on 7 November, real GDP is set to contract by 0.3% in the EU and 0.4% in the euro area this year. However, strong policy actions and substantial advances in the architecture of the Economic and Monetary Union have helped to stabilise the economy. Moreover, fiscal deficits are expected to fall to 3.6% of GDP in the EU and 3.3% in the euro area on the back of consolidation plans implemented in the course of the year.
Growth forecast to return in 2013
In the first half of 2013, growth is expected to gradually return: GDP is projected to increase by 0.4% in the EU and 0.1% in the euro area, although large divergences across Member States will remain. However, an adjustment of economic imbalances (reflected e. g. in the improvement of current-account balances in deficit countries) is under way. Together with structural reforms, this will pave the way for a stronger and more evenly distributed economic expansion in 2014. GDP growth in 2014 is projected at 1.6% in the EU and at 1.4% in the euro area.
Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro: "Our projections point to a gradual improvement in Europe's growth outlook from early next year. Major policy decisions have laid the foundations for a strengthening in confidence. Market stress has been reduced, but there is no room for complacency. Europe must continue to combine sound fiscal policies with structural reforms to create the conditions for sustainable growth to bring unemployment down from its current unacceptably high levels."
Unemployment expected to peak in 2013
In the light of the weakening of the economic activity, in 2012 unemployment is expected to reach 10.5% in the EU and 11.3% in the euro area. It is further expected to peak at 10.9% in the EU and 11.8% in the euro area in 2013 before falling back slightly in 2014. Again, the situation varies considerably between Member States with unemployment rates ranging from 4.5% (Austria) to 25.1% (Spain) in 2012.
Inflation set to decrease
Energy prices and indirect tax increases continued to be the main drivers of consumer price inflation in recent quarters. However, underlying domestic price pressures are subdued. Inflation is estimated at 2.7% in the EU and 2.5% in the euro area this year. In 2013 it is projected to decrease to 2.0% and 1.8% respectively.
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