Eurozone economic growth revised slightly down

Updated: 2007-09-11 21:44

The European Commission Tuesday revised slightly down its forecast for economic growth in the eurozone this year, citing a weaker performance in the second quarter and the recent turmoil in the financial markets.

Based on an update for the seven largest member states in the European Union (EU), the commission said in its interim forecast that the 13-nation bloc sharing the same currency would see economic growth of 2.5 percent in 2007, while the whole EU would grow at 2.8 percent.

Both figures were 0.1 percentage point less than those predicted by the commission in its spring forecast in May, which mainly reflected a weaker-than-expected outcome in the second quarter.

The European economies made a good start in the first quarter of this year with the gross domestic product (GDP) expanding by 0.7 percent quarter-on-quarter in both the euro zone and the EU, mainly driven by buoyant investment.

However, the quarterly growth rate eased to 0.3 percent in the second quarter in the euro zone and 0.5 percent in the EU, falling short of expectations.

In addition, the recent turbulence in the financial markets triggered by problems in the US sub-prime mortgage market has clearly increased the downward risks to the European economic outlook, the commission said.

Meanwhile, the commission said European growth was expected to continue due to sound fundamentals and a still favorable global environment.

Joaquin Almunia, EU Commissioner for Economic and Monetary Affairs said "the sound economic fundamentals of the European economy will help weather the current financial turmoil."

"But the increased risks to the outlook require governments to hold steady to the reform and budgetary consolidation agenda, precisely to enhance the resilience of the EU economy," Almunia said.

On the inflation front, consumer prices in 2007 were expected to increase by 2.0 percent in the euro area and 2.2 percent in the EU, both up by 0.1 percentage point compared with the spring forecast due to higher commodity prices.

The commission's interim forecast was based on updated figures from France, Germany, Italy, the Netherlands, Poland, Spain and Britain. The seven countries account for more than 80 percent of the EU's GDP.

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