The European Commission has said it believes that euro zone economic growth this year will be slightly better than it had predicted back in May. But that it will slow next year and in 2009. EU Economic and Monetary Affairs Commissioner Joaquin Almunia said that “thanks to strong world growth and solid economic fundamentals, the negative impact should be limited.”
He blamed turbulence in the financial markets, the US slowdown and ever-rising oil prices: “This is mainly due to the impact of tighter financing conditions and reduced confidence in the aftermath of the financial market turmoil that started last August.” Last year the region’s GDP grew by 2.8%. The Commission has now lifted its 2007 estimate to 2.6% from 2.5%. For next year it has cut its growth forecast to 2.2% from 2.5%. Slovenia is expected to enjoy the best expansion and Portugal the worst.
The commission said it expects the current market turmoil to “peter out gradually.” It sees the main growth engines as domestic demand and private consumption thanks to falling unemployment. The euro zone inflation forecast for this year was left unchanged at 2% with a prediction it will inch up next year to 2.1%.