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European Commission Projections for Euro Zone

Tue, Nov 3 2009, 13:41 GMT
by ecPulse.com analysis team

ecPulse.com

European Commission boosted economic growth for the euro zone, as they project that the nation will reach recovery next year, while there still are major factors weighing on the outlook of the euro zone, like the widened budget deficit alongside the highest unemployment rates since 1995.

The commission projects that the zone this year will contract by 4.0 percent, while expanding next year by 0.7 percent, before growing more in 2011 by 1.5 percent. Concerning estimates for unemployment; they are anticipated to slip 9.5% from the current 9.7%, while spiking to 10.7% next year and 10.9% in 2011.

Projections from the commission gives us evidence that although it is forecasted that economic growth will be reached next year, the labor sector will still remain fragile, thus continuing to weigh on the outlook of the region, while further curtailing consumption.

Now turning to their estimates for consumer prices; we see that CPI this year will plummet to 0.3% before rising to 1.1% next year and 1.5% in 2011. The European Central Bank is already projecting that the general price levels will decline as a result of the current economic conditions.

The central bank already has interest rates set at their lowest at 1%, while buying 60 billion euros of governmental bonds as a way to stimulate economic conditions, next to encouraging more spending to take place in the zone. Although officials have been doing everything they can to stimulate conditions, the commission also expects the government's budget deficit this year to widen to -6.4% of GDP, before worsening further next year to -6.9 percent of GDP.

Expectations for next year's GDP are bright, yet there are other major obstacles ruining the outlook of the euro zone, because even when the nation does reach recovery, they still have high unemployment rates, an unstable financial sector and a widened budget deficit that will take some time to lower and/or fix.

Published on  Tue, Nov 3 2009, 13:44 GMT