Outlook: The European Commission issued a dire forecast for Europe’s economy for the rest of 2011.
“The outlook for the European economy has deteriorated,” Olli Rehn, EU economic and monetary affairs commissioner, said on Thursday.
“GDP growth is now expected to remain subdued in the second half of the year, coming close to standstill at year-end,” the Commission reported. It now projects GDP growth of 0.2% in both the third and fourth quarters within the 27-nation EU, and 0.2% in third and 0.1% in the fourth quarter for the 17 euro area countries.
These figures all represent a decrease of a 0.025% from the Commission’s mid-year outlook.
The provisional forecast is developed using early indicators from France, Germany, Italy, the Netherlands, Poland, Spain and the UK, but does not include data from the Grand Duchy and other EU members.
“Uncertainty about the economic outlook remains high,” the Commission’s report said. “In particular, the global economy has slowed down, and hopes that the sovereign debt crisis would gradually dissipate have been disappointed. The risks to growth remain tilted to the downside. Conversely, risks to the inflation outlook have now abated somewhat since spring and are considered as balanced.”
Indeed, the Commission revised its inflation forecast downwards. It now expects prices to only rise 2.9% in the EU and 2.5% in the euro zone this year, remaining above two percent through December. Both are cuts of 0.1% from its summer forecast.
However, earlier this month Luxembourg’s statistics agency said inflation in the Grand Duchy reached 2.9% in July and 3.3% in August.
In addition, the OECD said Luxembourg registered the single highest monthly rise in unemployment, up 0.3% in July to 4.6%. The rich world club said unemployment across the euro zone remained unchanged at 10 percent, and flat at an average 8.2% across all OECD countries.