The European economy has started growing again in the second quarter of this year. Over the past months, there have been encouraging signs that the economic recovery will continue.
Growth in the second half of 2013 is forecast at 0.5 % compared to the same period 2012 in the EU. On an annual basis, GDP is expected to remain unchanged in the EU and to contract by 0.4 % in the eurozone in 2013. But looking ahead, growth is forecast to gradually gather pace, hitting 1.4 % in the EU and 1.1 % in the eurozone in 2014 (1.9 % and 1.7 % in 2015).
However, the aggregate figures mask substantial differences across EU member countries.
Domestic demand is set to gradually become the main engine of growth in Europe. This also against the background of a weakened outlook for emerging market economies.
Olli Rehn, Commission Vice-President for Economic and Monetary Affairs and the Euro: "There are increasing signs that the European economy has reached a turning point. The fiscal consolidation and structural reforms undertaken in Europe have created the basis for recovery. But it is too early to declare victory: unemployment remains at unacceptably high levels. That’s why we must continue working to modernise the European economy, for sustainable growth and job creation."
Since labour market developments typically lag behind GDP growth by half a year or more, the recovery of economic activity is expected to translate only gradually into job creation. This year, unemployment has remained very high in some countries and employment has continued to decline. However, recent months have seen labour-market conditions start to stabilise.
The outlook is for a modest decline in unemployment towards 10.7 % in the EU and 11.8 % in the eurozone by 2015. But national differences remain very wide, with unemployment ratios ranging from around 5 % to 27 % this year.
Subdued consumer-price inflation is expected to prevail throughout the forecast period. Inflation in the eurozone is expected to be 1.5 % in both 2013 and 2014. In the EU the outlook is for 1.7 % and 1.6 %, respectively.
The reduction in general government deficits is set to continue. In 2013, fiscal deficits are projected to fall to 3.5 % of GDP in the EU and 3.1 % in the eurozone. In line with the projections for deficits and growth, debt-to-GDP ratios are still rising and expected to peak in 2014, at around 90 % in the EU and almost 96 % in the eurozone.