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Spring forecast: towards a slow recovery

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The EU economy is currently estimated to be in a mild recession. But a slow recovery is forecast from the second half of the year.

A recovery is in sight

According to the spring forecast released on 11 May, real GDP is projected to stagnate this year in the EU and to contract slightly in the euro area. However, strong policy actions and major advancements in the EU institutional framework have brought about an easing of financial market tensions in the beginning of 2012 and a tentative stabilisation of confidence, expected to strengthen over the forecast periode. Together with an expected acceleration in global growth, a gradual recovery is forecast to start in the second half of the year and gather speed in 2013.

All in all, GDP is projected to stagnate in the EU and contract by 0.3% in the euro area this year, and to grow by 1.3% in the EU and by 1.0% in the euro area in 2013.

Growth differentials remain

Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro, said: "A recovery is in sight, but the economic situation remains fragile, with still large disparities across Member States". Growth differentials between EU Member States are underpinned by different structural challenges, financing costs and public finances sustainability.

Unemployment stays high

The expected return to growth should lead to a gradual improvement of labour markets in 2013. The unemployment rate, which lags changes in economic activity, is expected to remain at 10.3% in the EU and at 11% in the euro area in 2012 and 2013.

Public finances improve

Notwithstanding the output slowdown in the course of 2011, public finances in the EU improved significantly. On the back of already decided consolidation combined with a gradual economic recovery, budget deficits are expected to continue declining from 4.5% of GDP in the EU (4.1% in the euro area) in 2011 to 3.6 % in the EU (3.2% in the euro area) in 2012 and further in 2013, with large differences among Member States.

The increase of debt-to-GDP ratios is forecast to slow down. Debt-to-GDP ratios are expected to reach 87.2% of GDP in the EU (92.6% in the euro area) by 2013. 

Inflation slows

Inflation is estimated to slow gradually and to fall below 2% in 2013. Energy prices and indirect taxes have been the main drivers of consumer price inflation in recent quarters.

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