Brussels, 22/11/2000 (Agence Europe) - It is in talking of his "optimism" that Pedro Solbes presented, during a press conference held this Wednesday, the autumn economic forecasts from the European Commission. Covering the 2000-2002 period, these forecasts confirm that the EU experiences, despite the meteoric rise in oil prices and the weakness of the Euro against the Dollar, the most favourable economic situation of ten years. These forecasts have been based upon the price for a barrel of oil of around USD 30 and the hypothesis of wage moderation. Below are the main elements that were underlined by the Commission for Economic and Financial Affairs.
- Growth. It will fluctuate around 3.4% in 2000 for the EU and even 3.5% in the Euro area, which equates to the highest rate of growth since 1989. In 2001, it should, according to the Commission, fall back to 3.1% in the EU and 3.2% in the Euro area; in 2002, it should be 2%. This fall compared to 2000 stems from the rise in the price of oil that will affect growth by 0.3% in 2001 (after having already weighed negatively by 0.2% in 2000). The Commission reveals that growth will thus remain good. The forecasts take into account four elements: i) the rise in oil prices and the depreciation of the Euro that have lifted inflation, which weighs on true household income and the costs of production of companies; ii) tax breaks and job creation that contribute to maintaining the global revenue available on a relatively high trajectory and thus support private consumption; iii) the helping hand given to EU exporters by the vigour of global demand at the same time as the weakness of the Euro in 2000. This weakness will be increasingly less clear, but global demand remains robust; iv) the rise in short-term interest rates that affects long term activity, but the long-term rates remain higher. Only Greece should see its growth accelerate significantly (up to 4.8% in 2002).
- Inflation. It is here that the of the rise in oil prices is most seen: it has raised inflation 0.7% in the EU in 2000, year were inflation should settle at 2.1%. It was 1.1% in the Euro area in 1999 and will be 2.3% in 2000. The depreciation of the Euro also played a negative part in the increasing of import prices. In 2001, the effect of oil prices should fall and bring additional inflation of 0.4%, or inflation of 2% in the EU and 2.2% in the Euro area. These figures respectively fall to 1.8% and 1,9% in 2002. Inflation should remain clearly above the Community average in certain smaller Member States, Ireland, and the Netherlands especially. The gaps in inflation in the Euro area should however exceed 3.4% in 2000 and 1.6% in 2002.
- Employment. Mr Solbes welcomed the fact that some 2.6 million jobs will no doubt be created in 22000 in the EU, with an annual rhythm of 1.6% which is the best since 1990. This dynamism should be maintained at 1.2% in 2202 for the EU as a whole, despite a slight slowdown in 2001. Either way, the level of unemployment should go from 8.4% this year to 7.3% in 2002, time when the number of unemployed will be back down to 13.3 million (against 16.4 in 1999).
- Budgetary surplus. They strongly improved, the EU went from a deficit of 0.7% of GDP in 1999 to a surplus of 1.2% in 2000 (from -1.3% to +0.3 for the Euro area). In 2001, the budgetary surplus should however contract and only represent 0.2% of GDP in the EU; the Euro area will return to a deficit of 0.5%. In 2001, five member States will post a deficit: Greece and Austria with less than 1% of GDP, Germany and, with a deficit located between 1 and 1.5%, Italy and Portugal.
Mr Solbes was thus able to note a "certain loosening", the structural deficits having not been attacked at the root, what "could lead to an little overheating".
For first time, forecasts also cover candidate countries
For the first time, the Commission extended the exercise of forecasts to accession candidate countries that should experience, according to it, growth of more than 4% on average between 2000 and 2002. On the other hand, inflation inflicts a counter blow with regards to the high prices for energy; a slight fall in inflation is expected in 2001 and 2002, except in Romania and Turkey, countries with strong inflation.
EUROPE will return in its next Bulletin to the forecasts concerning the candidate countries.
The main figured tables that accompany the Commission documents will furthermore be published: a) in our weekly statistical supplement next Monday with regards to the EU 15 countries; b) in the statistical supplement for the following week concerning the accession candidate countries.
