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Recession is over but major challenges persist - 03/11/2009

Coins scattered on financial section of newspaper ©EC

The outlook is for a gradual recovery, with growth expected to slacken off next year.

The EU is emerging from recession, with GDP growing in the second half of the year. However, with the downturn at the start of the year, the forecast for 2009 as a whole remains largely unchanged: GDP is expected to fall by 4%.

Looking ahead, the economy is likely to expand just ¾% in 2010 and 1½% in 2011.

The rebound stems mainly from improvements in world trade and in financial conditions. Both monetary policy and government spending are also driving the pickup in activity.

In the coming year, several factors will restrain growth, lowering demand for EU goods and services. These include increased jobless rates and the need for both households and enterprises to reduce their debt.

Unemployment is set to reach 10¼% in 2010 and public deficit will likely rise to 7½% of GDP in the EU.

After stagnating during the recession, consumer prices are expected to rise, but inflation will still remain relatively low. Inflation differences between countries will be less pronounced than they were prior to the crisis.

The recovery could be surprisingly strong in the months ahead. Whether it can be sustained remains to be seen. The commission's next forecast update, due in February, will address the large EU countries.

The commission usually publishes economic forecasts four times a year – comprehensive spring and autumn forecasts and smaller interim forecasts in February and September.

More on EC autumn 2009 economic forecasts

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