The European Commission is optimistic about the euro zone’s economic state and future, with stronger than previously forecast growth in 2006 and for the next two year, as well as lower inflation and lower unemployment. EU Economic and Monetary Affairs Commissioner Joaquin Almunia said: “GDP growth has accelerated strongly in 2006, driven by very strong investment and if you compare these figures with our previous forecast in the spring, they have been increased upwards by half a percentage point.”
The commission’s twice yearly forecast has economic growth at 2.6% this year though down to 2.1% in 2007. Inflation will come in at 2.2% this year and 2.1% in 2007. Unemployment is predicted to fall to 8% this year and be down to 7.7% next year. Euro zone GDP growth last year was just 1.4% per cent.
The main reason why growth is not expected to continue at the same level in the coming year is the expected slowdown in world economic growth as the US economy cools. With the United States Europe’s biggest export market, that would have an impact. Another factor is Germany’s planned 3% increase in sales tax for goods and services from the start of next year. EU economists think that will push up inflation in the largest euro zone economy and slow economic growth in the region.