The EU economic outlook is strengthening. While leading indicators point to GDP growth gaining momentum in the near term, the conditions for a sustained recovery in the medium term are also improving.
All main indicators confirm on-going recovery
Since the Commission's last forecast in winter, the outlook both for the EU and the eurozone is confirming a muted but continuing recovery. Following real GDP growth of 1.6% in the EU and 1.2% in the eurozone in 2014, activity is expected to accelerate in 2015 to 2% and 1.7% respectively. Though growth differentials will persist, the gap between the best performing countries and those still facing difficulties will narrow. In 2015 all EU economies are expected to grow again.
Siim Kallas, Commission vice-president said: "The recovery has now taken hold. Deficits have declined, investment is rebounding and, importantly, the employment situation has started improving. Continued reform efforts by Member States and the EU itself are paying off. This ongoing structural change reminds me of the profound adjustment that the central and eastern European economies undertook in the 1990s and in subsequent years, linked to their joining the EU exactly 10 years ago. Their experience shows how important it is to embrace structural reforms early on and to stay the course, whatever challenges may be faced along the way. In this spirit, we must not lessen our efforts to create more jobs for Europeans and strengthen growth potential."
Conditions in the labour market started to improve in 2013. However, with only limited economic expansion underway and the typical lag between recovery and employment, little net job creation is expected in the short term.
Unemployment in the eurozone and the EU is forecast to fall slightly this year. In 2015 the rate is projected to be around 10.1% in the EU and 11.4% in the eurozone. Significant differences will remain among EU countries over the forecast period (4.8% in Austria and 26% in Greece this year).
Inflation is set to remain low for some time. Factors behind subdued consumer price inflation are: falling commodity prices, the continued appreciation of the euro, continued weak demand and competitiveness gains in vulnerable EU countries.
From the low level of 0.8% in the eurozone and 1% in the EU in 2014, inflation will increase somewhat in 2015, to an average of 1.2% and 1.5% respectively.
During 2011-13, substantial reductions in public spending have been implemented in many EU countries. Thanks to these efforts and improved conditions, the stance of fiscal policy has now become more neutral.
In 2014, budget deficits are expected to stand at about 2.5% of GDP in the EU and eurozone. The EU's debt-to-GDP ratio is forecast to peak this year at about 90% (96% in the eurozone), before it starts falling from 2015 on.