Spring forecasts 2009-2010

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a tough 2009, but EU economy set to stabilise as support measures take effect

The European Commission published its 2009 «Spring Forecast». The European Commission usually publishes economic forecasts four times a year: comprehensive exercises in spring and autumn and lighter «interim forecasts» published in between, usually in February and September for the largest EU economies and for a few variables only.

In the Commission's spring forecast, GDP in the European Union is projected to fall by 4% this year and to broadly stabilise in 2010. The main factors behind the recession are the worsening of the global financial crisis, a sharp contraction in world trade and ongoing housing market corrections in some economies. However, with the impact of fiscal and monetary stimulus measures kicking in, growth is expected to regain some momentum in the course of 2010. Labour markets will be severely affected, with the unemployment rate expected to increase to 11% in the EU in 2010. The public deficit is also projected to rise sharply, to 7¼% of GDP in 2010, reflecting both the slowdown and the discretionary measures taken to support the economy, in line with the European Recovery.

Plan proposed by the Commission.

Concerning Russia, following the global economic downturn, Russia's growth is expected to be negative in 2009 (-3.8%) and moderately positive in 2010 (1.5%). Inflation should remain at double-digit levels, decelerating slightly from almost 14% to around 10%, as the fall in economic activity and the reduction in commodity prices cushion the inflationary effects of the rouble devaluation. The budget is expected to swing sharply from a hefty surplus to large deficits, of respectively 6.5% and 2.7% of GDP, due to the reduction in commodity prices and in economic activity, plus the large fiscal stimulus packages. The unemployment rate is expected to increase significantly. Russia is also forecast to see major falls in both its trade and current account surpluses in 2009 and 2010, to, respectively, 5.1% and 6.3%, and 1.4% and 2.7% of GDP. These figures are a large downward revision compared to the 2008 autumn forecast and the interim forecast of January 2009.

Full document available at:

http://ec.europa.eu/economy_finance/publications/publication15048_en.pdf

The Russia forecast is available at:

http://ec.europa.eu/economy_finance/pdf/2009/springforecasts/non_russia_en.pdf

The press release is available at:

http://europa.eu/rapid/pressReleasesAction.do?reference=IP/09/693

№5(33), 2009