The economic situation of the 27-member European Union is set to further consolidate its gradual recovery, with prospects for 2011 looking slightly better than projected in the autumn.
GDP is projected to grow by around 1% this year and by close to 2% in 2012, the European Commission said in a statement Friday.
EU Commissioner for Economic and Monetary Affairs , Olli Rehn , presenting the spring forecasts on the EU economy at a press conference today said, “The main message in our forecast is that the economic recovery in Europe is solid and continues, despite recent external turbulence and tensions in the sovereign debt market. ”
“Public deficits are clearly declining. It is now essential to strengthen these trends of growth and consolidation, ” he noted.
Oil prices , Rehn said, are expected to remain at around USD 117 p/b this year and next year.
According to the forecast, inflation, however, is rising faster, reflecting the increase in commodity prices.
Headline inflation is projected to average almost 3% in the EU and 2% in the euro area this year, before easing to about 2% and 1% respectively in 2012.
Labour-market conditions in Europe are expected to slowly improve. The unemployment rate is projected to fall by percentage point to a little over 9% on the EU and to 9 % in the the euro area by 2012.
The EU forecasts noted , however, that political changes in the Middle East and North Africa and the economic fallout of the earthquake and tsunami in Japan have heightened uncertainty and constitute downside risks to global economic activity, with the potential to lead to globally higher inflation and lower growth.
Financial markets, particularly some sovereign-bond segments, remain fragile, and damaging negative feedback loops cannot be totally excluded. Risks from tensions in exchange-rate markets are also present, it added.