EFN Report Winter 2009/10: Economic Outlook for the Euro Area in 2010 and 2011

In 2010, the recovery of the world economy will be driven by a strong expansion of production in many emerging markets. Rising exports will be the main driver of the recovery in the euro area. We expect GDP to grow around 1.7% and 1.2% uring 2010 and 2011, respectively. What impedes the recovery is the state of labour markets. In fact, unemployment will continue to rise well into 2011, partly because firms with low capacity utilization will no longer be able to keep workers in employment. The most important reason for the recovery of the real economy appears to be renewed – although still fragile – confidence on financial markets. Official interest rates close to zero and substantial purchases of highly rated assets by important central banks have drastically increased the attractiveness of more risky assets.

11. January 2010

Authors European Forecasting Network

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