The European Union's executive commission trimmed back its 2005 eurozone growth forecast to 1.6% in spring estimates released Monday, blaming high oil prices, the strength of the euro and weakness in Germany. However, the European Commission remained optimistic that the clouds would clear over the course of the year as domestic demand, benefiting from historically low interest rates, picked up.
The commission's spring estimate marks a slowdown from the 2.0% growth it was previously forecasting and from the 2.0 % chalked up last year. But the estimate brings the commission's forecasts into line with those of private economists as well as the International Monetary Fund and the European Central Bank, which are both counting on 1.6% growth this year.
Germany, the biggest economy in Europe, weighed heavily on the eurozone growth with only 0.8 % forecast for this year, half the 1.6 % registered in 2004. The commission also forecast that growth in the full, 25-nation EU would be 2.0% this year, slowing from the 2.4% from up last year.
The commission also predicted that employment would pick up this year and next, with three million new jobs created in the EU over the period. But the eurozone's stubbornly high unemployment rate would remain unchanged this year at 8.8% before falling to 8.5% in 2006. The EU would also see its unemployment rate steady at 9.0 % this year before falling to 8.7 % in 2006.
Copyright Agence France-Presse, 2005
