Austria
The country’s economy was on course to recover well during the first half of this year but the improvement did not last, with consumer demand and manufacturing slowing as 2012 wore on. Now, the European Commission’s economists are predicting that recovery will restart towards the end of 2013. Fiscal consolidation in 2012 has been hampered by “past and new measures for the banking system” that have forced the government’s deficit higher.
Belgium
Belgium’s economy is “at a standstill”, according to the Commission’s forecast, and recovery is not likely to start until early next year. Rising unemployment, little growth in disposable income and no increase in savings rates mean that private consumption will not pick up significantly in 2013.
Bulgaria
Strong domestic demand is driving growth in Bulgaria. Gross domestic product (GDP) growth is expected to pick up gradually, although the labour market remains weak, which could drive long-term unemployment upward.
Cyprus
The island is going through “a deep recession” with a “rapid deterioration” in economic activity. Cyprus has been badly affected by the crisis in Greece, and Commission economists see the economy continuing to contract over the next two years.
Czech Republic
The Czech economy entered recession in the second half of last year and the Commission estimates that even in 2014, growth will still be “below potential”. Disposable income has contracted and domestic and foreign demand remains weak. Unemployment is expected to peak next year as the slowdown bites.
Denmark
The Danish economy is showing “muted growth”, according to the economic forecast, mainly because exports have slowed down compared with this time last year. Domestic demand is expected to drive growth next year and in 2014 but this will be partly dependent on the unemployment rate falling.
Estonia
The economy’s fast growth in 2011 is predicted to slow considerably this year. Nevertheless, strong domestic demand, public investment and a favourable labour market are keeping the economy strong.
Finland
The Finnish economy is expected to record very little growth in 2012, with confidence increasing gradually over the next two years, “resulting in a slowly picking up recovery”. Despite the stuttering economy, the labour market is likely to remain strong.
France
Strong domestic demand has helped France’s economy to perform better this year than many of its fellow eurozone countries. How-ever, growth has slowed and, the Commission says, “prospects for an imminent recovery have waned”. Unemployment and tax rises are expected to impede people’s purchasing power. The number of jobless in France will rise “persistently” until 2014. The deficit is expected to be 4.5% in 2012, in line with the official target, but is forecast to still be at 3.5% in 2013 – missing the target of 3%: “Lower impact of revenue measures compared with the official estimates, notably concerning the fight against tax evasion and the reduction of corporate income tax credits, and slightly more dynamic public expenditure…play a role”, the report says.
Germany
The German economy will “regain momentum” next year thanks to stronger private consumption driven in part by low interest rates. “The fundamentals of the German economy remain intact,” despite an expected slowdown in the second half of 2012, the report says. Jobs growth is expected to pick up again in 2014 and wages will increase while inflation will slowly fall. The government’s deficit is on course to decrease as it moves towards a balanced budget.
Greece
In the country where the eurozone’s sovereign-debt crisis began, the Commission forecasts an eventual return to growth in 2014. This relies on “the return of confidence and investment, boosted by the implementation of reforms under the economic adjustment programme, as well as progress with major projects co-financed by EU funds,” the report says. The jobs market is also predicted to start recovering in 2014, with the unemployment rate at about 22% after peaking in 2013. The report says that the recession has been “stronger than expected” but that the government deficit-reduction programme is “on track.” The government aims to achieve a primary budget balance in 2013, the report says. “Based on the current projections, this would require additional measures of around 5% of GDP, which are being adopted with the 2013 budget.” t
Hungary
The country experienced a recession this year, and although recovery is expected over the next two years it will be weak, as a consequence, the Commission says, of “policy uncertainty and increasingly distortionary taxes, most notably very high extra burdens on the financial sector”. The jobs market will improve slightly but inflation remains high and the deficit is predicted to rise above official targets by 2014.
Ireland
Although the Irish economy has strengthened since the bail-out in 2010, the Commission says that “the road to recovery is still challenging”. The global slowdown brought an abrupt halt to some signs of recovery seen last year, and low domestic demand and a weak labour market presages further contraction. The country’s deficit is expected to fall to 7.5% of GDP next year, down from 13.4% in 2011.
Italy
On provisional data, Italy will have suffered “a deep recession” this year, the Commission’s report says, notably because of a sharp decrease in domestic demand. The eurozone’s sovereign-debt crisis has restricted banks’ abilities to lend, and financial markets remain unstable. However, officials believe that growth will resume in the second half of 2013. Labour productivity is projected to fall in 2012, and start increasing again, but only moderately, next year and in 2014, and unemployment is predicted to continue to rise over the next two years. Mario Monti’s government is expected to miss its deficit-cutting targets both this year and next, despite these already being revised upwards.
Latvia
Latvia is a success story. Its economic performance is better than expected and, although it will slow slightly over the next two years, the economy is the fastest-growing in the EU. Sound public finances reflect the positive situation and unemployment is expected to fall.
Lithuania
Domestic demand has started to lose momentum but growth is continuing, albeit at a slower pace. Unemployment continues to fall, although it remains high. The 2012 budget contains substantial cuts in expenditure, with a decline in spending on goods and services and social benefits, as fiscal consolidation continues.
Luxembourg
Economic growth is better than the eurozone average, but there are signs of a slowdown. This “could be rather of a structural nature, for an economy until now almost spared from the crisis”, the Commission says. The economy is heavily reliant on the financial services and steel industries at a time when both are suffering from the crisis. Growth expectations for 2012 have been lowered and job creation is expected to slow.
Malta
Economic recovery is under way – although it is not as strong as was the case in 2010. A gradual improvement in domestic demand is predicted to aid recovery, although inflation remains above the eurozone average.
The Netherlands
The country is “slowly emerging from the doldrums”, according to the Commission’s report. The second half of 2012 is expected to show economic contraction, and with domestic demand set to remain weak, the recovery in 2013 and 2014 is likely to be only modest. Inflation rose in 2012 but will level off over the next two years, while unemployment is set to rise to 6.2% in 2014. Government savings mean that the deficit is expected to fall to 2.9% of GDP next year despite the weak economic activity.
Poland
The economy was looking good in the first half of this year but started to slow significantly after the summer. The report says that private consumption remained “sluggish”, as labour-market prospects worsened and the consumer mood deteriorated. What is more, the government’s fiscal-consolidation measures were a drag on public spending. Commission economists forecast that private consumption will begin to improve only towards the end of 2014 as employment rises and consumer confidence returns.
Portugal
Another country trying to gets its economy back on track after a bail-out, Portugal’s recovery is “faster than expected”. A sharp fall in unit labour costs this year is expected to boost exports and competitiveness. However, the growth outlook has deteriorated since the Commission’s spring forecast, and the country will emerge from recession only towards the second half of next year. Portugal’s recover is being hampered by Spain’s economic problems, the Commission says, noting that unemployment is on the rise and not expected to fall until 2014.
Romania
Harsh winter conditions dragged down economic activity in Romania at the start of this year, the Commission said. The economy subsequently recovered thanks to strong investment and public consumption, but the report warns: “The severe summer drought, waning consumer confidence and renewed difficulties in absorbing EU funds point to a bleaker outlook.” Growth will accelerate in 2014 as structural reforms pay off, but unemployment will remain high and there is uncertainty over whether the government will manage to cut the budget deficit.
Slovakia
Slovakia experienced one of the fastest recoveries from the eurozone crisis and that continued this year – but growth will start to slow in 2013. Despite the good performance, the government has struggled to cut unemployment. The rate is likely to go down only in 2014. The government is on course to cut the deficit. The report highlights “a major improvement in public finances… projected for 2013, with the headline deficit reaching 3.2% of GDP”.
Slovenia
The country slid back into recession and the Commission forecasts growth only in 2014. The report says that the weak economy also hinders fiscal adjustment and repairs to its balance-sheet, which will push the unemployment rate to 9.5% by 2014.
Spain
The “ambitious” government measures to rebalance the economy are holding back economic growth, and have driven unemployment higher, the Commission says. The jobless rate is expected to rise even further before it gets better. The report says that public finances “need to be brought back onto a sustainable path”. The Commission believes that Spain will start to recover in 2014 but warns that this depends on the government sticking to its current policies. It adds: “Planned expenditure cuts seem to be on track, but broad-based revenue shortfalls, higher interest payments and rising social transfers almost offset these improvements.” The deficit is forecast to reach around 6% of GDP in 2013 and then rise to 6.4% in 2014 as the recession impedes the attempts by the government, which had set a target of 4.5% for next year, to cut it.
Sweden
Growth returned to Sweden in 2012 “at a surprisingly strong level” thanks to resilient household consumption, investment and exports. Economic performance is likely to have stalled in the second half of this year – but prospects are good for the next two years. Unemployment is forecast to go down only gradually. The Commission warns that Sweden’s banking sector is vulnerable to financial-market disruption in Europe, although concerns over rising house prices have eased.
United Kingdom
British economic performance this year has been “unexpectedly weak”, the Commission says. Economists had predicted that exports would play a stronger role this year given the relatively weak currency, but “this did not come to fruition”. Forecasts for growth remain subdued, although household consumption is expected to improve, which may, the report says, “give the economy a much-needed injection in 2013 and 2014”. The unemployment rate remains low, and inflation is on track to reach 2% by the end of 2013 after peaking at 5.2% in September 2011, but debt and deficit targets will “remain elevated”.