(European Economy. 1. September 2011.
252pp. Tab. Graph. )
The European Commission publishes comprehensive macroeconomic forecasts twice-yearly in the spring and autumn. These are presented in the publication titled ‘European Economic Forecast’ (EEF), where the Commission discusses the economic situation and outlook for the euro area and the EU, its 27 Member States, the Candidate Countries as well as the EU’s main economic partners. The publication also includes thematic chapters which elaborate in greater detail on issues of relevance for the EU outlook.
The global economic recovery continues to make headway, but it is becoming more uneven, across major regions and within them. In the EU, the moderate economic recovery is generally developing as expected, with pronounced differences across countries and uncertainty at elevated levels. A positive contribution from the external side has started to impact positively on components of private domestic demand. The process of achieving a more balanced composition of economic growth has made further progress in the faster growing EU countries. Conversely, countries facing substantial economic adjustment challenges are understandably lagging behind, though there are encouraging signals that the recovery could materialise and gain momentum in 2011 and 2012. This leaves the European economies with a multi-speed recovery and the area as a whole, as with most other advanced economies, lagging behind the group of emerging market economies.
Economic growth in both the euro area and the EU is expected to continue along a trajectory of around 2%, slightly higher in 2011 than forecast last autumn, but broadly unchanged in 2012. On the back of higher commodity prices, inflation rates are forecast to increase to close to 2½-3% in 2011, before falling back to around 2% in 2012. The resulting pressure on real disposable income is dampening private consumption growth in 2011. More moderate inflation and, with the usual lagged response to developments in output, higher employment are set to brighten growth prospects in 2012. Economic growth is expected to be strong enough to support the progressing fiscal consolidation.
The two thematic chapters in the EEF spring 2011 publication provide in-depth-analysis of two issues that are highly topical at the current juncture: (i) the macroeconomic impact of developments in sovereign risk premia, and (ii) savings and investment developments across the EU.