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AP
EU Cuts Growth Forecasts for 2008, 2009
Friday November 9, 6:18 am ET
By Robert Wielaard, Associated Press Writer
European Union Cuts Growth Forecasts for 2008, 2009; Blames Oil Prices, Subprime Debacle
BRUSSELS, Belgium (AP) -- The European Union cut its economic forecasts Friday, saying rising oil prices and turmoil in financial markets, stemming from the subprime mortgage debacle in the United States, will significantly cut growth over the next two years.
The European Commission forecast that growth in the 27-nation bloc will slow to 2.4 percent in both 2008 and 2009, from 2.9 percent in 2007.
In the euro zone -- the area of 13 nations using the euro as a common currency -- growth will slow to 2.2 percent in 2008 and even further to 2.1 percent in 2009, down from 2.6 percent in 2007, according to the forecast.
"Clouds have clearly gathered on the horizon with this summer's turbulence in the financial markets, the U.S. slowdown and the ever-rising oil prices," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said as he unveiled his autumn economic forecasts.
"As a result, economic growth is becoming more moderate and the downside risks have clearly increased," he added.
He said "strong world growth and solid economic fundamentals" were limiting the damage to the EU somewhat.
Echoing concerns of the European Central Bank, Almunia said "inflation should remain moderate, but the risks are on the upside." On Thursday, the ECB held its key interest rate steady at 4 percent but cited concerns about rising inflation.
The European Commission said the slowdown in the U.S. economy appeared "sharper than expected this spring, with the downturn in the housing market curbing GDP growth to around 2 percent, well below trend."
However, it added, the overall outlook remains for a mid-cycle slowdown in the United States, not a recession.
The EU head office said a doubling of commodity prices has left only a small mark. "A certain impact on consumer price inflation has been noted, but due to ... moderate wage behavior overall, has so far not caused any sizable second-round effects," it said.
The EU's economic forecasts come at a time of sharp increases in oil prices that are the result of the unrelenting growth in China and other economic newcomers. Oil prices have reached record highs -- trading around $96 a barrel Friday -- "notwithstanding the fact that oil prices had already more than doubled in the preceding three years," the European Commission said.
It predicted a "continued tight oil market with sustained strong demand."
Since oil is traded in dollars, the strength of the euro -- trading lately at over $1.47 -- shields Europeans somewhat from the increase in the price of imports.
EU Cuts Growth Forecasts for 2008, 2009
Friday November 9, 6:18 am ET
By Robert Wielaard, Associated Press Writer
European Union Cuts Growth Forecasts for 2008, 2009; Blames Oil Prices, Subprime Debacle
BRUSSELS, Belgium (AP) -- The European Union cut its economic forecasts Friday, saying rising oil prices and turmoil in financial markets, stemming from the subprime mortgage debacle in the United States, will significantly cut growth over the next two years.
The European Commission forecast that growth in the 27-nation bloc will slow to 2.4 percent in both 2008 and 2009, from 2.9 percent in 2007.
In the euro zone -- the area of 13 nations using the euro as a common currency -- growth will slow to 2.2 percent in 2008 and even further to 2.1 percent in 2009, down from 2.6 percent in 2007, according to the forecast.
"Clouds have clearly gathered on the horizon with this summer's turbulence in the financial markets, the U.S. slowdown and the ever-rising oil prices," EU Economic and Monetary Affairs Commissioner Joaquin Almunia said as he unveiled his autumn economic forecasts.
"As a result, economic growth is becoming more moderate and the downside risks have clearly increased," he added.
He said "strong world growth and solid economic fundamentals" were limiting the damage to the EU somewhat.
Echoing concerns of the European Central Bank, Almunia said "inflation should remain moderate, but the risks are on the upside." On Thursday, the ECB held its key interest rate steady at 4 percent but cited concerns about rising inflation.
The European Commission said the slowdown in the U.S. economy appeared "sharper than expected this spring, with the downturn in the housing market curbing GDP growth to around 2 percent, well below trend."
However, it added, the overall outlook remains for a mid-cycle slowdown in the United States, not a recession.
The EU head office said a doubling of commodity prices has left only a small mark. "A certain impact on consumer price inflation has been noted, but due to ... moderate wage behavior overall, has so far not caused any sizable second-round effects," it said.
The EU's economic forecasts come at a time of sharp increases in oil prices that are the result of the unrelenting growth in China and other economic newcomers. Oil prices have reached record highs -- trading around $96 a barrel Friday -- "notwithstanding the fact that oil prices had already more than doubled in the preceding three years," the European Commission said.
It predicted a "continued tight oil market with sustained strong demand."
Since oil is traded in dollars, the strength of the euro -- trading lately at over $1.47 -- shields Europeans somewhat from the increase in the price of imports.
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