Brussels, 27/10/2008 (Agence Europe) - A week before the European Commission's unveiling of its autumn economic forecast on Monday 3 November 2008, BusinessEurope hints at the type of forecast that can be expected. As expected, in its own forecasts published on Monday 27 October, the EU employers' organisation has slashed its growth forecasts for Europe for 2009. BusinessEurope says that while the worst of the credit crunch may be over (the credit system in Europe is not expected to totally collapse), its impact on the real economy in terms of jobs and growth will intensify.
Based on a survey of its own member federations, BusinessEurope is now forecasting growth in GDP of 0.4% in the EU27 and 0.2% in the eurozone in 2009 (compared with 1.4% and 1.2% respectively in 2008). BusinessEurope explains that its forecasts have been revised down due to the financial crisis and the distinct prospects of a global slowdown. It is also expecting to see a slowdown in investment and a reduction in new jobs. EU companies' gross fixed capital formation plans gave been revised down by 1.7% for 2009 in the EU27 and by 1.2% in the eurozone. Recruitment prospects have also been cut back in 2009 and unemployment is expected to rise to 8.2% in the eurozone (compared with 7.5% in 2008) and 7.8% in the EU27 (compared with 7% in 2008). In this context and with the expected fall in commodity prices, inflation is expected to fall from 3.4% in 2008 to 2.4% in 2009 in the eurozone, and from 3.6% to 2.5% in the EU27. Compared with the high euro exchange rates until the summer of this year, the euro's fall against the dollar is good news for exports, but the volatile exchange rates are unsettling for companies.
BusinessEurope says that a number of measures are needed to deal with the situation, recommending respect of the Stability and Growth Pact, avoiding encouraging protectionism, not cutting R&D and education expenditure, pursuing reforms, boosting productivity and implementing the Small Business Act, and calling for a reduction in euro interest rates. After the reduction in rates decided in October 2008, the European Central Bank (ECB) has already hinted that 'we can expect a further one very soon,' explained BusinessEurope's director general, Philippe de Buck at a press conference. He said he hoped this cut would indeed take place. Given the lowering of inflationary pressures, the President of the ECB, Jean-Claude Trichet, said at a press conference in Madrid on 27 October, that it was 'possible' that the ECB Governing Council would decide to reduce interest rates at its upcoming meeting on 6 November. 2008 (A.B. trans fl)