5 May 2014
EU cuts Eurozone growth forecasts, warns on slow inflation
FXStreet (Łódź) - European Commission published its updated growth forecasts for the Eurozone today, reducing its prediction for 2015 and pointing to the slowing inflation as the main risk to expansion during the next two years.
According to the official release, Eurozone's economy is expected to grow by 1.2% in 2014 and by 1.7% in 2015 (compared to the previous forecast of 1.8%). As for CPI, the European Commission sees it at 0.8% this year and rising towards 1.2% the next, with both forecasts lower than those presented in February.
Unemployment on the other hand is expected to fall quicker than projected before, to 11.8% in 2014 and to 11.4% in 2015, versus 12% and 11.7% seen previously. Another optimistic sign was that Spain's GDP forecast was raised to 2.1% from 1.7% in 2014.
Marco Buti, Director-General for Economic and Financial Affairs at the European Commission said in the accompanying statement: “Overall, the outlook has improved, but it remains conditional on continued credible action on several fronts at national and EU levels.”
“The necessary competitiveness adjustment and debt reduction in vulnerable countries are more difficult to achieve with very low EU-wide inflation, in particular if it were to persist over too prolonged a period.”
Siim Kallas, the Commission Vice-President, who spoke after the release of the forecasts, also pointed to the strengthening of the recovery in the Eurozone. He acknowledged the progress made in such countries as Greece or Portugal, but warned that political uncertainty in Slovenia could pose a threat to the country's fragile economy.
Kallas also stressed that the European Commission didn't see a risk of deflation in the Eurozone and suggested that geopolitical tensions were currently the biggest threat for the area.
According to the official release, Eurozone's economy is expected to grow by 1.2% in 2014 and by 1.7% in 2015 (compared to the previous forecast of 1.8%). As for CPI, the European Commission sees it at 0.8% this year and rising towards 1.2% the next, with both forecasts lower than those presented in February.
Unemployment on the other hand is expected to fall quicker than projected before, to 11.8% in 2014 and to 11.4% in 2015, versus 12% and 11.7% seen previously. Another optimistic sign was that Spain's GDP forecast was raised to 2.1% from 1.7% in 2014.
Marco Buti, Director-General for Economic and Financial Affairs at the European Commission said in the accompanying statement: “Overall, the outlook has improved, but it remains conditional on continued credible action on several fronts at national and EU levels.”
“The necessary competitiveness adjustment and debt reduction in vulnerable countries are more difficult to achieve with very low EU-wide inflation, in particular if it were to persist over too prolonged a period.”
Siim Kallas, the Commission Vice-President, who spoke after the release of the forecasts, also pointed to the strengthening of the recovery in the Eurozone. He acknowledged the progress made in such countries as Greece or Portugal, but warned that political uncertainty in Slovenia could pose a threat to the country's fragile economy.
Kallas also stressed that the European Commission didn't see a risk of deflation in the Eurozone and suggested that geopolitical tensions were currently the biggest threat for the area.