Economic Forecasts, Autumn 2002

After the decline in economic activity in the last quarter of last year, the recovery in the euro area and the EU started in the first quarter of this year, but failed to accelerate subsequently. Investment continued to contract and private consumption was weak as uncertainty increased, preventing the promising pick-up in international trade to spill over to domestic demand. The recovery is much slower than anticipated and the average growth rate in the euro area is estimated to be 0.8 % in 2002 and is forecast at only 1.8 % in 2003. Only from the second half of that year is growth expected to gain momentum, if confidence returns, oil prices ease and stock markets remain stable. Nevertheless, the rise in the unemployment rate is limited and temporary, but the fall in the inflation rate is slow. Due to a deterioration in the economic situation and an easing of budgetary policy, the general government deficit is expected to widen to 2.3 % of GDP in 2002 in the euro area (to 1.9% of GDP in the EU), with not much improvement expected in the following year.

• Primary Source

http://ec.europa.eu/comm/economy_finance/publications/european_economy/forecasts_en.htm http://ec.europa.eu/comm/economy_finance/publications/european_economy/forecasts_en.htm

---