The Commission’s Spring Economic Forecast expects the recent upward trend to continue in 2004. However, this development more is fuelled by global trade rather than domestic demand.
The EU's economy has picked up in the second half of 2003 and this trend is expected to continue in 2004. While the overall growth rate for the EU in 2003 is now estimated to have been at 0.8 per cent, the Commission in its Spring Economic Forecast expects that the recovery will gain momentum in 2004, reaching a 2 per cent growth rate.
External stimulus from global demand is considered to be one of the main driving forces behind this upwards development as exports surged. Moreover, business-friendly macroeconomic policies and progress in structural reforms are also underpinning the recovery. Domestic demand continued to be negative until the last quarter of 2003, when investment picked up, taking over from trade as the main growth engine. Weak private consumption, however, did not underpin this trend.
The employment rate stabilised at 8.8 per cent in 2003 in the euro area. Despite of the overall positive outlook, the labour market is not expected to experience the positive effects of the economic turn around immediately: employment is forecast to rise only by 0.3 per cent in 2004, and slightly stronger in 2005 at 0.9 per cent. With a gradual rise of the labour market, consumer confidence is also expected to pick up.
Regarding budgetary developments in the Member States, the Commission expects the general government deficit in the euro zone to remain stable at 2.7 per cent. While some deteriorisation are expected in several countries (Italy, Greece), these are balanced out by an improvement of the situation in Germany, Spain, France, Austria and the UK.