EU to cut 2005 growth forecast as oil price surges

Oct 15, 2004 02:00 AM

The European Commission will cut its growth forecast for 2005, as record oil prices and a global slowdown hamper the export-led recovery in Europe, according to a draft of the commission's economic projections.
Growth in the $ 9 tn economy of the dozen nations sharing the euro will reach 2.1 % in 2005, less than the 2.3 % predicted in April, according to a 44-page draft of the forecasts compiled Oct. 5. Revisions are possible before the final report is released Oct. 26.

"The slowdown in world growth will result in a moderate deceleration in export growth," the commission, the European Union's Brussels-based executive agency, said in the draft.
"Higher and volatile oil prices and other commodity prices might put a damper on global growth."
A 68 % surge in oil prices this year has cooled the global economy, driving European unemployment to a five-year high of 9 %. At least eight reports signalled slowing growth in Europe, and European Central Bank President Jean-Claude Trichet said that risks "have increased with the uncertainty that is governing oil prices."

Commission spokesman Gerassimos Thomas said the forecasts won't be final until published.
As announced by Monetary Affairs Commissioner Joaquin Almunia, better-than-expected economic performance in the first half will lead the commission to lift its forecast for 2004. The draft foresees a pace of 2.1 %, up from the 1.7 % predicted in April. The commission predicts growth of 2.2 % in 2006.

Source: Bloomberg
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