Monday, May 4, 2009

European Commission says EU outlook is really gloomy

From the European Commission:
In the Commission's spring forecast, GDP in the European Union is projected to fall by 4% this year and to broadly stabilise in 2010. The main factors behind the recession are the worsening of the global financial crisis, a sharp contraction in world trade and ongoing housing market corrections in some economies. However, with the impact of fiscal and monetary stimulus measures kicking in, growth is expected to regain some momentum in the course of 2010. Labour markets will be severely affected, with the unemployment rate expected to increase to 11% in the EU in 2010. The public deficit is also projected to rise sharply, to 7¼% of GDP in 2010, reflecting both the slowdown and the discretionary measures taken to support the economy, in line with the European Recovery Plan proposed by the Commission.
And on inflation:
Overall, HICP inflation is projected to be slightly lower than 1% in the EU (and ½% in the euro area) in 2009, and to reach a trough in the third quarter in both regions. As base effects of past hikes in energy and food prices drop out of the annual rate this autumn, HICP inflation is expected to gradually pick up to about 1¼% next year.
This is a very dreary outlook. However, it is roughly consistent with the IMF's outlook on the Eurozone (you can view the tables here). Remember that the EU is the European Union, which includes countries that did not, or have yet to, adopt the Euro.

The European Commission's forecast is focused on the EU, which includes Eurozone members plus the U.K., Denmark, Sweden, and Eastern European economies that are not yet members of the Eurozone. You can see an active chart of the Commission's outlook at the country level:

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