EU predicts a gloomy economic future
European Commission sounded a gloomy note about the state of the European economy as interim economic forecasts were published based on surveys of the bloc's seven largest economies.
The European Commission sounded a gloomy note about the state of the European economy Thursday as it revised down its growth estimates for 2008 by nearly half a percentage point.
According to the European Union executive's latest interim forecasts, gross domestic product (GDP) in the 27-member bloc was expected to grow by 2.0 per cent in 2008. The commission had predicted a growth rate of 2.4 per cent in its November forecasts.
GDP in the 15-member eurozone was now expected to grow by 1.8 per cent instead of 2.2 per cent, as previously forecast.
The uncertain outlook of the global economy was being blamed on the slowdown of the US economy, soaring oil and food prices and the ongoing turmoil in the financial markets.
"The hopes that the financial turmoil might be relatively short-lived and that it would gradually peter out - which was a crucial assumption in the commission's autumn 2007 forecast - have now given way to a realisation that further problems may still be ahead," EU officials said in a statement.
Europe's economic locomotive, Germany, was expected to grow by 1.6 per cent in 2008, down from a November forecast of 2.1 per cent, while Italy's predicted GDP growth rate was halved to 0.7 per cent.
At the same time, 2008 inflation forecasts for both the eurozone and the EU as a whole were revised up by half a percentage point to 2.6 and 2.9 per cent, respectively.
"Europe clearly begins to feel the impact of the global headwinds in terms of lower growth and higher inflation," said EU Economic and Monetary Affairs Commissioner Joaquin Almunia.
Almunia said the best way to cope with the current situation was to "maintain the course of structural reforms" and enact "sound and stable macro-economic policies"
Meanwhile The European Union's interim economic forecasts were published on Thursday, based on surveys of the bloc's seven largest economies (listed below).
The key considerations of the forecast follow:
GROWTH: Predicted gross domestic product (GDP) growth for 2008 has been revised down by 0.4 percentage points in both the EU and the euro area since November. Current figures predict a growth rate of 2.0 per cent for the EU and 1.8 per cent for the 15-member euro area.
GDP growth 2008, per cent year-on-year:
EU (27 states) - 2.0
Euro area (15 states) - 1.8
Germany - 1.6
France - 1.7
Britain - 1.7
Italy - 0.7
Spain - 2.7
Poland - 5.3
Netherlands - 2.9
INFLATION: Inflation in the EU has been driven upwards by soaring oil and food prices, but is expected to drop back towards the end of 2008. Current estimates are based on an average oil price of 90 dollars per barrel over the year.
Inflation 2008, per cent year-on-year:
EU (27 states) 2.9
Euro area (15 states) 2.6
The 15 members of the euro area are Germany, France, Italy, Spain, the Netherlands, Belgium, Portugal, Austria, Luxembourg, Ireland, Finland, Greece, Slovenia, Cyprus and Malta.
Of the bloc's seven largest economies, Britain and Poland are not euro members. However, Poland hopes to become so in the next few years.