European Commission: Eurozone economy will shrink slightly this year
According to the forecast, Finland and its most important export partners will experience modest growth
According to the European Commission, the gross domestic product in the eurozone is expected to contract by 0.3 per cent this year compared with 2011.
The estimates, however, are somewhat uncertain owing to the fact that there is a lot of variation between different countries, the Commission points out.
In the economic area that covers all of the 27 EU countries, the GDP is forecast to remain unchanged this year.
The Commission’s view has quickly become more pessimistic. As late as in November of last year, the Commission still predicted clearly more positive growth figures for 2012, namely +0.5 per cent for the eurozone, and +0.6 per cent for the entire EU area.
According to the Commission’s current view, during the first six months of 2012 the production figures will go down, but in the latter half of the year the economy will gradually start exhibiting growth again.
European Commissioner for Economic and Monetary Affairs Olli Rehn said that despite the stalling growth the economy of the European Union area is showing signs of stabilisation. “The pressure in the financial markets is easing off.”
According to Rehn, important steps have been taken to aid the stabilisation development. Now it is possible to start stimulating growth and the creation of jobs.
The Commission expects Finnish GDP to grow to the tune of 0.8 per cent this year.
According to the prediction, Finland’s exports will be reduced.
The employment situation and the salary development, however, will support demand in the domestic market, which in turn will be manifested in increased production, the Commission calculates.
According to the Commission, what is somewhat risky for Finland is the fact that investment items form a large portion of the country's exports.
If the trust in the growth of the economy starts to dwindle on a global scale, causing the investment figures to turn downwards significantly, this will be manifested quickly as reduced export figures and weakened growth for Finland.
Estonia is among the countries with the best forecast figures. Its economy is expected to grow by 1.2 per cent. The corresponding figures for Poland, Latvia, and Lithuania are 2.5, 2.1, and 2.3 per cent respectively.
Finland’s most important export market areas, namely Sweden and Germany, were also given positive growth predictions.
Sweden’s economy is expected to pick up by 0.7 per cent and Germany’s by 0.6 per cent.
The situation seems to be worst in Greece, for which the Commission’s growth expectations for 2012 are very much on the negative side.
The Greek GDP is expected to shrink by 4.4 per cent this year. The Portuguese GDP the Commission predicts to go down almost as steeply, by 3.3 per cent.
The eurozone’s inflation rate is predicted to settle at 2.1 per cent. For the entire EU the corresponding figure is 2.3 per cent.
The most significant price hike is predicted for Hungary, where consumer prices will go up by more than five per cent this year, if the Commission’s forecast proves accurate.
Previously in HS International Edition:
Finance Minister Urpilainen hopes Greece bailout will be enough (23.2.2012)
Rehn: Europe teeters on brink of recession (11.11.2011)
European Commission press release: Interim Forecast: mild recession with signs of stabilisation - 23/02/2012