European Union Lowers Its Growth Forecasts

On Tuesday the European Union (EU) announced that it has lowered its growth outlook for the European area.

The new forecasts by the EU has gross domestic product (GDP) of the 18 nation Eurozone region now set at an expected rise of 0.8% for 2014, and a projected rise of 1.1% for 2015. These figures are down on the previously released forecasts of 1.2% for 2014, and 1.7% for 2015.

The largest economies of the EU are still struggling to come to term with the debt crisis that previously produced two recessions over a six year period, and across Europe, inflation is now predicted to be at lower levels than previously thought.

The EU is now forecasting inflation for 2015 to be at 0.8%, which is more than 50% lower than the previously hopeful goal set by the European Central Bank (ECB) of just under 2%. The ECB has said previously that an inflation figure of 1.1% was likely for 2015.

Looking towards 2016 and the EU are of the belief that an inflation figure of 1.5% is attainable, while the ECB is of the opinion that a figure of 1.4% is closer to the mark.

French, German, Italian and Spanish Forecasts

European forecasters now believe the French deficit will widen to 4.4% of GDP for 2014, which is up 0.5 % from a previous forecast for 2014 of 3.9%. The 2016 French deficit is now forecasted at 4.7% of GDP.

Germany is being tipped to slow in growth during the 3rd and 4th quarters of 2014, with forward growth projections of 1.1% for 2015 (down from a previous forecast of 2%) and 1.8% now expected for 2016.

As Italy continues in its 3rd recession in 6 years, its economy is likely to shrink to 0.4% growth this year. 2015 may see a modest rise to 0.6%, but that will be well down on the 1.2% that had previously been hoped for.

The country’s worrisome debt is forecasted to hit 133.8% of GDP in 2015, with the slightest of reductions to 132.7% for 2016.

Spain is looking to bounce back in a favourable way, with predictions of growth for 2015 set at 1.7%, and 2016 set at 2.2%. This will come on the back of 1.2% growth recorded for the 2014 period.

A budget deficit trimming is also planned for in Spain, with this years predicted 5.6% of GDP hopefully reducing to 4.6% by 2015, and 3.9% in 2016.

Looking Forward

There still appears to be a long way to go for the EU recovery to return the region to proper health. Core countries such as France and Germany will continue to face challenges ahead as they attempt to grow their economies, while the extreme difficulties facing both Greece and Italy will continue to be a burden for years to come.