Brussels, 13/09/2010 (Agence Europe) - In its economic forecasts published on Monday 13 September 2010, the European Commission stated last spring that “the economic recovery in the EU, while still fragile, is progressing at a faster rate than expected”. It is now counting on GDP growth in 2010 of 1.8% in the EU and 1.7% in the eurozone. In its previous forecasts it had expected respective growth rates of 1.0 and +0.9%. The Commission notes that real GDP growth in the EU and eurozone has substantially improved in the second quarter of 2010. The economic recovery in the EU, while still fragile, is progressing at a faster pace than previously envisaged. In particular, real GDP growth for both the EU and euro area surprised markedly on the upside in the second quarter of 2010. This strong performance stemmed from an export-driven industrial rebound, in line with the continued strong dynamics of global growth and trade in the first half of the year. Encouragingly, signs of a revival in domestic demand, including private consumption, also became evident, particularly in Germany. Commission inflation forecasts 2010 have remained unchanged overall since the spring: a 1.8% rise in prices in the EU and a 1.4% rise in the eurozone: 1.1% in Germany, 1.6% in France, 3% in the United Kingdom, 1.6% in Spain, 1.1% in the Netherlands and 2.6% in Poland.
The European economy is gaining strength but attention should be paid to the uncertain international environment and performance differences between member states. Olli Rehn, the European commissioner for economic and monetary affairs, stated that “the German and Polish economies are the highest performers”, notes the Commission. The Commissioner added that “the European economy is clearly on a path of recovery, more strongly than forecast in the spring, and the rebound of domestic demand bodes well for the job market. However, uncertainties remain and safeguarding financial stability and continuing fiscal consolidation remain key priorities. At the same time, we need to frontload structural reforms to lift our growth potential”.
Quarterly changes: EU GDP growth in 2010 rose to 0.3% in the first quarter, 1.0% in the second and the Commission is expecting +0.5% in the third and +0.4% in the fourth quarter (+0.3, +1.0, +0.5 et +0.3% in the eurozone). The figures for the member states are as follows: Germany (+0.5% in the first quarter, +2.2 in the second, +0.6 in the third and +0.4 in the last quarter), Spain (+0.1, +0.2, -0.1 and +0.1), France (+0.2, +0.6, +0.4 and +0.3), Italy (+0.4, +0.4, +0.5 and +0.2), the Netherlands (+0.5, +0.9, +0.4 and +0.3), Poland (+0.7, +1.1, +0.6 and +0.6), United Kingdom (+0.3, +1.2, +0.5 and +0.6). Annual data: the Commission is forecasting growth in 2010 of 3.4% for Germany (the same score for Poland), far ahead of the Netherlands (+1.9%), the United Kingdom (+1.7%), France (+1.6%), Italy (+1.1) and Spain (-0.3%).
Rebalancing of EU growth towards domestic demand. The Commission is also expecting GDP growth in the EU to ease in the second half of 2010, reflecting the “softening of the global economy and the fading of the temporary factors that kick-started the recovery”. Moreover, it appears that the recovery is broadening out across sectors and demand components. In particular, the contribution of private investment and consumption to GDP growth in the second quarter of 2010 exceeded the combined contributions of inventories and net exports. “This rebalancing is encouraging, especially as the weaker external environment in the second part of the year is set to have a dampening effect on EU export growth”, explains the Commission, which also points out that on the other hand, financial markets are still “fragile”
Risk assessment. Amid continued high uncertainty, risks to the EU growth outlook for 2010 appear broadly balanced. On the upside, the rebalancing of GDP growth towards domestic demand, and the spillover from the pick-up in activity in Germany to other member states, may materialise to a greater extent than currently envisaged. On the downside, weaker than expected external demand and further tensions in financial markets cannot be ruled out, “while fiscal consolidation could weigh more on domestic demand in the countries concerned than anticipated. As for the inflation outlook, risks also appear to be broadly balanced for 2010”. (L.C./transl.fl)