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EU economy: slowly recovering from a protracted recession - 03/05/2013

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

The economy is projected to return to growth in the second half of 2013. However, annual GDP is forecast to contract by 0.1% in the EU and 0.4% in the eurozone.

Following the recession that marked 2012, the EU economy is forecast to stabilise in the first half of 2013. GDP is expected to start growing again in the second half of the year, slowly at first, but picking up speed in 2014.

In the aftermath of the financial crisis, demand within the EU is still held back by several factors including the reduction of the debt overhang and a shortage of credit. The main driver of growth this year is therefore likely to be net exports. Private consumption and investment in the EU look set to pick up modestly next year. This forecast is based on the assumption that continued policy efforts will prevent the sovereign-debt crisis from worsening.

GDP

Annual GDP this year is now forecast to contract by 0.1% in the EU and 0.4% in the eurozone. For 2014, economic activity is projected to expand by 1.4% in the EU and 1.2% in the eurozone.

Unemployment

Due to the slow rate of recovery of economic activity joblessness will not be reduced in the short run. Unemployment is forecast to reach around 11% in the EU and 12% in the euro area in 2013 and to stabilise there in 2014. There will continue to be large differences between EU countries.

Inflation

Inflation has continued to slow down as the impact of past energy-price rises has faded. It is projected at 1.8% in the EU and 1.6% in the eurozone in 2013, stabilising at 1.7% and 1.5%, respectively, in 2014.

Public finances

Fiscal deficits are set to continue falling in 2013 - to 3.4% of GDP in the EU and 2.9% in the eurozone. The pace of structural consolidation is expected to be slower this year than in 2012. Debt-to-GDP ratios are forecast to reach 89.8% in the EU and 95.5% in the eurozone.

More on the economic forecast

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