EU economic forecasts revised slightly down

The forecasts for the EU economy in 2007 and 2008 were revised slightly downwards yesterday as a result of the current worldwide financial turmoil.

European Economic and Monetary Affairs Commissioner Joachim Almunia announced that based on an update for the seven largest EU member states, the Commission forecasts economic growth in 2007 at 2.8 per cent in the EU and 2.5 per cent in the euro area. This represents a downward revision of 0.1 percentage points compared with the spring forecast.

According to the last specific forecasts made by the EU for Malta last spring, the island's economy is expected to perform better than the EU average currently being forecast. The EU is in fact estimating that in 2007, Malta's economy will grow by three per cent.

Asked whether the EU will also revise downwards its forecasts for Malta's performance when a new update on the island is issued in October, EU sources said that it was too early to say as its services are still working on the Maltese figures. However they said that the global downward trend in the EU economy won't necessarily reflect on Malta's economic situation.

"For us it is quite evident that the Maltese economy is picking up and is performing well when compared to three to four years ago.

"We had already suggested in our Spring economic forecasts a better performance of the Maltese economy than the EU average for this year.

"We will see whether this is confirmed in October when a new forecast on Malta will be issued," the sources said.

Mr Almunia said yesterday that European growth is expected to remain supported by sound fundamentals and a still favourable global environment. However, he said that the recent turbulence has clearly increased the downward risks to this outlook.

"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."

According to the EU forecasts on the inflation front, consumer prices in 2007 are expected to increase by 2.2 per cent in the EU and two per cent in the euro area as higher commodity prices take their toll.