European Commission’s winter forecast for the EU economy, released on February 25, predicted that the economic recovery in the bloc will speed up in 2014, after three quarters of subdued growth.
The EC revised its forecast for economic growth in the EU as a whole to 0.1 per cent in 2013 – compared to -0.1 per cent growth in the spring forecast and zero growth in its autumn forecast. The euro zone is still expected to shrink by 0.4 per cent, but that is an improvement over the -0.7 per cent posted in 2012 (-0.4 per cent in the EU28).
“As it is typical following deep financial crises, however, the recovery remains fragile. Nevertheless, recent positive economic news means that the forecasts for GDP growth this year and next have been raised slightly since the autumn,” the EC said.
The latest growth forecast estimated economic growth at 1.5 per cent in the EU as a whole and 1.2 per cent in the euro area (a slight bump from the autumn forecast, when the Commission set its sights on 1.4 per cent and 1.1 per cent growth, respectively.)
“Recovery is gaining ground in Europe, following the return to growth in the middle of last year. The strengthening of domestic demand this year should help us to achieve more balanced and sustainable growth. Rebalancing of the European economy has been progressing and external competitiveness is improving, particularly in the most vulnerable countries,” European economic and monetary affairs commissioner Olli Rehn said.
“The worst of the crisis may now be behind us, but this is not an invitation to be complacent, as the recovery is still modest. To make the recovery stronger and create more jobs, we need to stay the course of economic reform,” he said.
In Bulgaria’s case, however, the EC raised its economic growth forecast for 2013 to 0.6 per cent, the first increase following three back-to-back cuts. Public spending and an increase in net exports offset the contraction in household consumption, but the Commission said that this figure “remains well below the estimated potential growth rate of the economy.”
“Going forward, the economic recovery is expected to be more broad-based, with domestic demand forecast to reinforce the export-driven growth momentum,” the EC said in its country forecast. Bulgaria’s economy was projected to grow by 1.7 per cent this year and two per cent in 2015.
Risks to this macroeconomic forecast seemed broadly balanced, the EC said. The most significant downside risk is related to the expected recovery in household consumption, which could prove weaker than expected given that the Bulgarian labour market and household sentiment are still fragile, the Commission said.