03 November 2009 15:30 [Source: ICIS news]LONDON (ICIS news)--The EU and eurozone economies will gradually recover in the next two years, with GDP forecast to grow by 0.75% in 2010 and by about 1.5% in 2011, despite unemployment and budget deficit figures predicted to rise, the European Commission said on Tuesday.
The Commission's autumn economic forecast projected that the EU economy will emerge from recession in the second half of this year, although GDP for 2009 as a whole is set to fall by 4% in both the EU and the eurozone.
The near-term rebound in activity followed from improvements in the external environment and financial conditions, the Commission said, as well as from fiscal and monetary policy measures.
“To maintain momentum and support the sustainability of the recovery, it is essential that we fully implement all announced measures and complete the repair of the banking sector,” said Joaquín Almunia, the EU commissioner for economic and monetary affairs.
“We must also begin to look more towards the medium term, and consider how best to address the adverse effects that the crisis has had on labour markets, public finances and potential growth,” said Almunia.
The EU’s labour market remains weak and the unemployment rate is projected to rise further this year, climbing to 10.25% in 2011 (and 10.75% in the eurozone), the Commission said.
“While the EU labour market has been more resilient to the recession than expected (largely on account of short-term policy measures, past reforms and labour hoarding in some member states), an increase in labour shedding is expected in the coming quarters," it said.
The public deficit in 2010 is expected to rise to 7.5% of GDP in the EU and to around 7% of GDP in the eurozone, the Commission said.
The Commission forecast inflation in the EU and eurozone to increase somewhat from its current low level, but to remain subdued throughout 2010 and 2011.
Rising commodity prices are likely to create upward inflationary pressure, although the substantial slack in the economy and weak wage growth was expected to have a dampening effect, the EU executive body said.
Inflation in both the EU and the eurozone was forecast to average 1.1% next year and 1.5% in 2011, the Commission said.
A wide variety of chemicals markets depend on demand from different sectors of the EU economy, which has suffered badly from the effects of the global economic crisis.
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