Brussels, 26/07/2007 (Agence Europe) - The European economy is at its highest point since 2000 but is expected, however, to experience a slowdown. Economists from the European Banking Federation (EBF) think that despite the slowdown, growth in GDP should, nevertheless, reach 2.7%. In forecasts published on Thursday, these economists estimate that internal demand should continue to support European productivity in 2008 and bring growth up to 2%. The figure is similar to the European Central Bank's (ECB) 2.3% figure for next year's growth. According to the economists, the general outlook is positive given that the pace of the recovery gathered speed in the first half of the year and surpassed initial expectations. This was mainly brought about by structural reforms and the strength of the German economy.
The EBF emphasises that company investment and household spending will be the main factors stimulating growth over the next 18 months. The EBF also expects a fall in the unemployment rate from around 7.1% in 2008, and for inflation to keep within the ECB targets of around 2%. Despite a likely tightening in monetary supply, members at the EBF's economic and monetary affairs committee are confident that the cautious approach of the ECB will not prematurely put the brakes on the current recovery. They say that there is possible scope for a strengthening of the dollar, with estimates ranging from 1.25 to 1.45 Euro to the USD in 2008. In the banking markets, the EBF is predicting a slowdown in credit to the private sector in 2008 (to 8.75% as opposed to 10% this year and 11.5% in 2006). It also points out that despite signs of slowdown, mortgage lending and consumer credit are both robust. (ab)