The European Commission's spring
forecast points to a continuing economic recovery in the European Union
following its emergence from recession one year ago. Real GDP growth is
set to reach 1.6% in the EU and 1.2% in the euro area in 2014, and to
improve further in 2015 to 2.0% and 1.7% respectively. The forecast
rests on the assumption that the agreed policy measures will be
implemented by Member States and the EU, taking forward the necessary
adjustment.
Siim Kallas, Commission
Vice-President said: "The recovery has now taken hold. Deficits have
declined, investment is rebounding and, importantly, the employment
situation has started improving. Continued reform efforts by Member
States and the EU itself are paying off. This ongoing structural change
reminds me of the profound adjustment that the central and eastern
European economies undertook in the 1990s and in subsequent years,
linked to their joining the EU exactly 10 years ago. Their experience
shows how important it is to embrace structural reforms early on and to
stay the course, whatever challenges may be faced along the way. In this
spirit, we must not lessen our efforts to create more jobs for
Europeans and strengthen growth potential."
A gradual pick-up in economic growth
Overall, domestic demand is
expected to become the key driver of growth over the forecast horizon.
Consumer spending should progressively add to growth as real income
benefits from lower inflation and the stabilising labour market. The
recovery in investment should continue to support growth, with gains in
both equipment and construction investment. The contribution of net
exports is expected to diminish over the forecast horizon.
The gradual nature of this
upturn is in line with previous recoveries following deep financial
crises. While financing conditions remain benign on average, substantial
differences persist across Member States and across firms of different
size.
Labour market conditions started
to improve in the course of 2013 and more job creation as well as a
further decline in unemployment rates should follow (to 10.1% in the EU
and 11.4% in the euro area in 2015)...
Inflation is expected to remain low, both in the EU (1.0% in 2014, 1.5% in 2015) and in the euro area (0.8% and 1.2%).
Current account deficits in
vulnerable Member States have been reduced in recent years following
continuous price competitiveness gains. In a number of these economies
surpluses are expected in 2014 and 2015.
The reduction in general
government deficits is set to continue. In 2014, a decrease is projected
to around 2½ % of GDP in both the EU and the euro area. The debt-to-GDP
ratio will peak at almost 90% in the EU and 96% in the euro area before
falling next year.
The largest downside risk to the
growth outlook remains a renewed loss of confidence from a stalling of
reforms. Also, uncertainty about the external environment has increased.
On the other hand, further bold structural reforms could lead to a
stronger-than-envisaged recovery.
While current price developments
reflect both external factors and the ongoing adjustment process, a too
prolonged period of low inflation could also entail risks. However, the
gradually strengthening and increasingly broad-based recovery should
mitigate these risks.
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