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Interim economic forecast: recovery stalls - 16/09/2011

Hands holding binoculars on a table with a bar graph © istock/RBFried

EU growth projected to come to a near standstill by the end of 2011 due to sovereign debt crisis and financial market turmoil.

Economic growth in the EU and eurozone is slowing, the Commission says in its latest assessment for the second half of the year.

GDP growth in the EU in the second half of 2011 is now expected to be subdued. Based on the outlook for the seven largest EU countries, GDP is expected to expand by only 0.2% in both the EU and eurozone in the third quarter and by 0.2% in the EU and 0.1% in the eurozone in the fourth.

This outlook is influenced by several factors, including weakening global markets, which have hurt the EU's exports, and declining domestic consumption.

Continuing problems in financial markets and the debt crisis in some eurozone countries have also dented confidence - increasing investment costs for businesses.

Market uncertainty and concerns about the debt crisis suggest a period of weak growth in the EU that will be longer and deeper than was foreseen in the Commission's full forecast last spring.

Inflation easing gradually

Inflation is expected to gradually slow down due to lower commodity prices, weaker global demand and moderate wage increases, but is expected to remain above 2% until the end of 2011.

Growth for the year

As growth was strong in the first quarter of 2011, annual GDP for the whole year is projected to balance out at 1.7% for the EU and 1.6% for the eurozone.

The Commission publishes economic forecasts four times a year. The comprehensive spring and autumn forecasts cover growth, inflation, employment and public budget deficits and debts for all EU countries and several non-EU countries.

The smaller interim forecasts - normally published in February and September - review developments since the preceding forecast for the largest economies only.

The next forecast covering all EU countries and looking further ahead will be released in November.

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