05 November 2014

European Commission: 2014 Autumn Economic forecast - Slow recovery with very low inflation

Real GDP growth is expected to reach 1.3% in the EU and 0.8% in the euro area for 2014 as a whole. Growth is expected to rise slowly in the course of 2015, to 1.5% and 1.1% respectively, on the back of improving foreign and domestic demand.

An acceleration of economic activity to 2.0% and 1.7% respectively in 2016 is expected to be driven by the strengthening of the financial sector (following the comprehensive assessment by the European Central Bank and further progress towards the Banking Union), as well as recent structural reforms starting to bear fruit.

Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness, said: "We will put forward a €300 billion investment plan to kick-start and sustain economic recovery. Accelerating investment is the linchpin of economic recovery."

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: "There is no single, simple answer to the challenges facing the European economy. We need to act across three fronts: for credible fiscal policies, ambitious structural reforms and much-needed investment, both public and private. We must all assume our responsibilities, in Brussels, in national capitals and in our regions, to generate higher growth and deliver a real boost to employment for our citizens."

The economic recovery that started in the second quarter of 2013 remains fragile and the economic momentum in many Member States is still weak. Confidence is lower than in spring, reflecting increasing geopolitical risks and less favourable world economic prospects. Despite favourable financial conditions, the economic recovery in 2015 will be slow. This, reflects the gradual fading of the crisis legacy with still high unemployment, high debt and low capacity utilisation.

The European Central Bank’s recent comprehensive assessment has reduced uncertainties about the soundness of the banking sector and improving financing conditions should help with the pick-up in economic activity. In 2016, strengthened domestic and foreign demand and a continuation of very accommodative monetary policy associated with low financing costs should further strengthen growth.

In 2014, the range of Member States' growth rates is expected to remain broad, from -2.8% (Cyprus) to 4.6% (Ireland). However, growth differences are expected to decline over the next two years. In 2015 and 2016, all EU countries are set to register positive growth. This is also when the lagged impact of already implemented reforms should be felt more strongly.

Full press release

Reuters: European Commission cuts forecasts, euro zone recovery delayed

The euro zone will need another year to reach even a modest level of economic growth, the European Commission said on Tuesday, calling on Germany to help as Chancellor Angela Merkel again rejected a spending spree.

The EU executive cut its forecasts, saying the euro zone economy would expand by 0.8 percent this year, 1.1 percent next year and by 1.7 percent in 2016 -- a level the Commission said six months ago would be achieved next year. The delay in the upturn was due to drag on the economy from France and Italy.

"There is no single and simple answer. The economic recovery is clearly struggling to gather momentum," the EU's economics commissioner, Pierre Moscovici, told a news conference. Fellow European Commissioner Jyrki Katainen said Germany, Europe's biggest economy, should invest more to help the recovery.

Those calls were echoed by Italy's undersecretary for European Affairs, Sandro Gozi, who said the Commission's forecasts were proof that economic policies focussing heavily on budget rigour were misguided.

Full article on Reuters

© European Commission