Europe is still recovering, lending remains low, but the continent already came out of recession. That was the main message Commission vice-president and responsible for transport Siim Kallas had to convey on Monday, 5 May, in the "Spring 2014 economic forecast”.
The Commission's 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 said that unemployment remains high, but it is expected to improve in the next 2 years.
Kallas also 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 series of countries received warnings, Greece especially, where there is only "moderate rebound”, but mostly Croatia, where there is a "serious recession", and where "there is urgent need of serious reforms”.
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%).
Outside of Europe, emerging markets are still in a fluctuating state, while the outlook is bleak for Russia, "especially due to incertitude’s provoked by the crisis with Ukraine".
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