BRUSSELS – The ongoing economic recovery across Europe should help unemployment fall faster than previously expected, according to a new EU forecast released Monday.
In its spring forecast, the EU’s executive Commission said the economic recovery is spreading across the 28-country bloc and that should help reduce the ranks of the 25.7 million unemployed.
Among the 18 EU countries sharing the euro currency, the Commission expects unemployment to drop to 11.8 per cent this year and 11.4 per cent in 2015. Those predictions are lower than those it made in February, when it foresaw unemployment at 12 per cent this year and 11.7 per cent next.
“The recovery is gaining traction,” said Siim Kallas, the EU Commissioner in charge of economic affairs. “Importantly, the employment situation has started improving.”
However, the recovery isn’t expected to prompt upward price pressures in the eurozone. The Commission lowered its inflation forecast for the eurozone for this year from 1 per cent to 0.8 per cent, which is well below the European Central Bank’s target of close to but below 2 per cent.
Inflation dropped dramatically over the past year or so because of high unemployment, government spending cuts and tight credit conditions, leading economists to warn about the risk of outright falling prices, or deflation, which could dent growth.
The ECB will hold its next rate-setting meeting Thursday, but many analysts say the bank remains unlikely to further lower its benchmark interest rate or announce other counter-measures like large-scale asset purchases to boost inflation.
Low inflation was one of the threats to the economy noted by the Commission. It also cautioned over tensions stemming from the escalating crisis in Ukraine, just east of its border.
The eurozone emerged from recession last year following a protracted financial crisis that saw several countries requiring a bailout to avoid bankruptcy. Unemployment across the eurozone reached an all-time high of 12 per cent last year.
The Commission continues to expect the economy of the eurozone, which has a population of about 330 million, to grow by 1.2 per cent this year. In 2015, however, the Commission slightly revised downward its forecast by 0.1 percentage point to 1.7 per cent.
The U.S. economy, in turn, is expected to grow by 2.9 per cent this year and 3.2 per cent next year. The unemployment rate sank to 6.3 per cent last month.
For the wider EU, which includes members like Britain and Poland that don’t use the euro, the Commission expects unemployment to fall more rapidly, with the jobless rate 10.5 per cent this year and 10.1 per cent in 2015. Those are down on the February projections of 10.7 per cent and 10.4 per cent respectively.
Overall growth in the EU, which is the world’s biggest economy, is expected to be 1.6 per cent this year and 2 per cent in 2015.
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