2014: Gradually recovery of GDP with very low inflation in EU, euro zone
The economic recovery that started in the second quarter of 2013 remains fragile and the economic momentum in many Member States is still weak. The European Commission’s (EC) autumn forecast projects weak economic growth for the rest of this year in both the EU and the euro area. Real GDP growth is expected to reach 1.3 percent in the EU and 0.8 percent in the euro area for 2014 as a whole. “Growth is expected to rise slowly in the course of 2015, to 1.5 percent and 1.1 percent respectively, on the back of improving foreign and domestic demand,” Brussels officials estimate. An acceleration of economic activity to 2 percent and 1.7 percent respectively in 2016 is expected to be driven by the strengthening of the financial sector (following the comprehensive assessment by the European Central Bank and further progress towards the Banking Union), as well as recent structural reforms starting to bear fruit.
“The economic and employment situation is not improving fast enough. The European Commission is committed to use all available tools and resources to deliver more jobs and growth in Europe. We will put forward a EUR 300 billion investment plan to kick-start and sustain economic recovery. Accelerating investment is the linchpin of economic recovery,” Jyrki Katainen, European Commission Vice-President for Jobs, Growth, Investment and Competitiveness, said
Confidence is lower than in spring, reflecting increasing geopolitical risks and less favourable world economic prospects. Despite favourable financial conditions, the economic recovery in 2015 will be slow. This reflects the gradual fading of the crisis legacy with still high unemployment, high debt and low capacity utilisation.
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “There is no single, simple answer to the challenges facing the European economy. We need to act across three fronts: for credible fiscal policies, ambitious structural reforms and much-needed investment, both public and private. We must all assume our responsibilities, in Brussels, in national capitals and in our regions, to generate higher growth and deliver a real boost to employment for our citizens.”
The European Central Bank’s recent comprehensive assessment has reduced uncertainties about the soundness of the banking sector and improving financing conditions should help with the pick-up in economic activity. In 2016, strengthened domestic and foreign demand and a continuation of very accommodative monetary policy associated with low financing costs should further strengthen growth.
This year, the range of Member States’ growth rates is expected to remain broad, from -2.8 percent (Cyprus) to 4.6 percent (Ireland). However, growth differences are expected to decline over the next two years. In 2015 and 2016, all EU countries are set to register positive growth. This is also when the lagged impact of already implemented reforms should be felt more strongly.