| EU Lifts Growth Forecast for 2010 |
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03/11/2009 15:48 (17 Day 23:20 minutes ago) | |||||
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The FINANCIAL -- EU economy will emerge from recession in the second half of this year. A gradual recovery is expected with GDP forecast to grow by ¾% in 2010 and around 1½% in 2011, according to EU Commission.
The near-term rebound in activity follows from improvements in the external environment and financial conditions, as well as from the significant fiscal and monetary policy measures put in place, the Commission wrote. Further out, a number of factors are set to restrain private demand and thus, the strength of the recovery.
While the economy will remain weak, the commission said, gross domestic product is now expected to rise by 0.7 percent in 2010, better than the 0.1 percent contraction it projected last spring. It forecast the E.U. economy would grow by 1.5 percent in 2011, The New York Times reported.
The commission also predicted that despite the expected uptick in the latter part of the year, 2009 as a whole would contract by 4.1 percent from 2008, according to the same source. The International Monetary Fund took a more cautious view in its forecasts last month, predicting a contraction of 4.2 percent in 2009 and growth of only 0.3 percent next year.
'The EU economy is coming out of recession. This owes much to the ambitious measures taken by governments, central banks and the EU that have not only prevented a systemic meltdown but have kick-started the recovery,' EU Economic and Monetary Affairs Commissioner Joaquin Almunia said in a statement, Reuters informs.
To make sure the recovery does not falter, Almunia urged EU countries still to implement fully all announced support measures and complete the repair of the banking sector, according to the same source. The recovery, however, is expected to be bumpy. The global economy will go through a soft patch in the first half of 2010 as temporary factors peter out, slowing euro zone quarterly growth to 0.1 percent in the first two quarters of next year, the Commission said.
Having experienced the deepest, longest and most broad-based recession in its history, the EU economy has reached a turning point, the Commission wrote. Recent months have seen a marked improvement in the economic situation and financial conditions, largely due to the unprecedented fiscal and monetary policy actions that have been taken.
Several financial indicators are now back at pre-crisis levels, while confidence is advancing. The outlook for global growth and trade has also strengthened, especially in emerging-market economies, according to the Commission. On the basis of these developments, together with a favourable inventory adjustment, GDP growth in the EU and euro area is set to turn positive again in the second half of this year.
European Union finance ministers will discuss the Commission's forecasts and their implications for deficit-cutting next week, Reuters reported. The ministers are wary of withdrawing state support to the economy too early so as not to cripple the nascent recovery.
The Commission forecast unemployment in the euro zone would reach 10.7 percent of the workforce in 2010 and 10.9 percent in 2011, up from 9.5 percent seen this year, according to the same source.
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