Malta's economy should be able to recover from the effects of the global recession at a faster pace than the other member states of the eurozone, according to the new Spring Economic forecasts published yesterday by the European Commission in Brussels.

Economic activity in Malta this year should generate a GDP growth of 1.1 per cent against a 0.9 per cent predicted for the rest of the eurozone and this is also expected to have a positive effect on growth employment.

According to Brussels, while unemployment in the eurozone this year should reach a peak of around 10.3 per cent, Malta will still manage to create more jobs while unemployment levels should remain stable at 7.3 per cent, three percentage points less than the average in the eurozone.

In general, the Commission's economic forecasts for 2010 and 2011 show that the EU is managing to put the effect of the global recession behind it and start the road towards full recovery.

After experiencing the deepest recession in its history, the EU economy is this year set to grow by one per cent and 1.75 per cent in 2011.

This implies an upward revision of 0.25 per cent on a similar forecast made by the Commission last autumn.

However, according to the Commission, weak domestic demand will continue to restrain the recovery.

With regards to employment in the EU, the Commission's forecasts do not look good.

Although according to Brussels labour market conditions have shown some signs of stabilisation recently, the unemployment rate is still projected to peak this year and will reach 10 per cent in the EU.

Reflecting the usual lag between developments in the real economy and the labour market, employment is still expected to contract by some one per cent this year and beginning to increase only in the course of 2011.

On the other hand, public finances will remain under pressure, due to the impact of the recession.

As a result of the operation of automatic stabilisers and the discretionary measures taken to support the economy within the framework of the European Economic Recovery Plan, the government deficit has tripled since 2008.

It is projected to peak this year in the EU (reaching 7.25 per cent of GDP) and to improve slightly in 2011 (to around 6.5 per cent).

This follows from the expiry of temporary support measures and the pick-up in activity.

The debt ratio is set to remain on an increasing path.

The on average high and increasing public debt is the longest lasting legacy of the crisis and will impact the economy long beyond the current forecast horizon, the Commission said. According to the forecasts, in 2010 the eurozone will have an average debt amounting to 84.7 per cent of GDP.

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