The European Union’s (EU) economy is set to suffer due to a slowdown in the global recovery in the second half of 2010, but not to the extent that a “double-dip” recession is in sight, the bloc’s executive said on Monday.
World trade is expected to slow in the second half of the year as international attempts to fight last year’s recession are wound down.
That is set to take its toll on EU growth, but the bloc is still due to perform better than had been forecast in May, officials said.
“The recovery of the European economy is progressing at a faster pace than expected in the spring, though growth will somewhat slow down in the second half of the year. This gives reason for cautious optimism despite a more uncertain global environment,” the EU’s economics commissioner, Olli Rehn, said.
According to an interim forecast from the European Commission, the bloc’s quarterly gross domestic product (GDP) growth is expected to slow from 1 per cent in the second quarter to 0.5 per cent in the third and 0.3 per cent in the fourth.
In the 16-member eurozone, the commission expected 0.5 per cent and 0.3 per cent GDP growth in the third and fourth quarters, down from 1 per cent in the second.
“The global recovery is set to go through a soft patch in the second half of the year, though a double dip seems unlikely,” the commission said in a statement.
But the second-quarter surge was so strong that the EU’s economy is tipped to expand by 1.8 per cent and the eurozone by 1.7 per cent over the year. On May 5, the commission predicted annual growth of 1 per cent in the EU and 0.9 per cent in the eurozone.
“We now have solid ground under our feet, we have started scoring again, but there is no reason to shout for victory,” Rehn said.
In particular, Rehn stressed that much of the growth in the second quarter was driven by domestic consumption, rather than exports.
Experts have long warned that export-reliant states, such as Germany, run the risk of being hampered by slow growth in external markets if they do not try to stimulate domestic purchasing.
The latest figures are therefore “encouraging in the light of the expected softening of global demand in the second half of the year, (and) should also bode well for job creation in Europe,” Rehn said.
However, the forecast for Germany — the EU’s economic powerhouse, where a record 2.2 per cent upturn was registered in the second quarter — foresaw a slowdown in quarterly growth to 0.6 per cent in the third quarter and and 0.4 per cent in the fourth.
Despite the slowdown, Germany is tipped to record an annual growth rate of 3.4 per cent this year, the highest figure in the EU and higher than the German government itself predicted.
The figures were based on growth estimates for Germany, France, Britain, Italy, Spain, the Netherlands and Poland, seven EU states accounting for 80 per cent of the bloc’s GDP.
Spain was the only country in the group registering a contraction for 2010, albeit by a marginally lower annual rate than foreseen in May (-0.3 per cent rather than -0.4 per cent).
However, by the year’s end Spain was expected to return to quarterly growth, with growth picking up from -0.1 per cent in the third quarter to +0.1 per cent in the fourth.