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Eurozone in 'mild recession with signs of stabilisation'

The European Commission says that economic recovery in the eurozone will be sluggish for the first half of the year before a modest pick-up occurs.

European Commissioner for Economic and Monetary Affairs Olli Rehn
European Commissioner for Economic and Monetary Affairs Olli Rehn
Image: Yves Logghe/AP/Press Association Images

THE EUROPEAN COMMISSION anticipates that the “unexpected stalling” in economic recovery in the eurozone that occurred in late 2011 will extend to the first half of this year.

However, it has predicted that modest growth will take place during the second half of 2012.

In its interim forecast report, the Commission said real Gross Domestic Profit (GDP) is forecast to remain unchanged in the EU for 2012 (0 per cent) and contract by 0.3 per cent in the eurozone. Developments are expected to be uneven across countries.

Meanwhile, the inflation forecast for 2012 has been revised slightly upwards compared with the autumn – with persistently high energy prices cited as a cause for an increase in indirect taxes. Inflation now stands at 2.3 per cent in the EU and 2.1 per cent in the eurozone.

Ireland is estimated to have returned to modest growth of 0.9 per cent in 2011, following a contraction of 10 per cent in output during 2008 to 2010.

Irish export growth is expected to slow down in 2012 due to a weaker projected outlook for the eurozone in geneal. Overall, GDP is expected to grow by 0.5 per cent this year, with private consumption set to decline once again.

The Commission expects to see employment fall once more as the public service and financial sector shrink further, while  inflation is forecast to rise slightly to 1.6 per cent during the year.

The Commission says that if downside fears to the eurozone are to materialise in 2012, it could have an impact on demand for Irish exports. However, it also notes that – given Ireland’s “small and very open economy” – quarterly figures are particularly volatile and should be interpreted with caution.

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