European economic forecast : Autumn 2012.
Date: 2012-12-18
Institutions: Directorate-General for Economic and Financial Affairs
Subjects: economic analysis, economic forecasting, economic indicator, economic recovery, macroeconomics

European Commission 

Directorate-General for Economic and Financial Affairs 

COMMISSION STAFF WORKING DOCUMENT 

European Economic Forecast 

Autumn 2012 

EUROPEAN ECONOMY 

7/2012 

ABBREVIATIONS 

Countries and regions 

EU  
EA 
BE  
BG  
CZ  
DK  
DE  
EE  
EL  
ES  
FR  
IE  
IT  
CY  
LV  
LT  
LU  
HU  
MT  
NL  
AT  
PL  
PT  
RO  
SI  
SK  
FI  
SE  
UK  
HR 
JP 
US  

European Union 
euro area 
Belgium 
Bulgaria 
Czech Republic 
Denmark 
Germany 
Estonia 
Greece 
Spain 
France 
Ireland 
Italy 
Cyprus 
Latvia 
Lithuania 
Luxemburg 
Hungary 
Malta 
The Netherlands 
Austria 
Poland 
Portugal 
Romania 
Slovenia 
Slovakia 
Finland 
Sweden 
United Kingdom 
Croatia 
Japan 
United States of America 

BRICS    
CEE  
CIS  
EFTA  
MENA    
ROW 

Brazil, Russia, India, China and South Africa 
Central and Eastern Europe 
Commonwealth of Independent States 
European Free Trade Association 
Middle East and North Africa 
Rest of the World 

Economic variables and institutions 

BCS 
CDS  
EDP  
ESI  
Euribor   
GDP  
GNI  
HICP  
Libor  

Business and Consumer Surveys 
Credit Default Swaps 
Excessive Deficit Procedure 
Economic Sentiment Indicator 
European Interbank Offered Rate  
Gross Domestic Product 
Gross National Income 
Harmonised Index of Consumer Prices 
London Interbank Offered Rate 

ii 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
MTO  
NAWRU  
OIS  
PMI  
REER 
RWA  
SGP  
VAT  

CBR  
CPB  
EBA  
ECB  
EFSF 
ESM 
Fed  
IMF  
NBR 
NFI  
OBR 
OECD    
PBoC  
S&P  
WTO 

Medium-Term Objective 
Non-Accelerating Wage Rate of Unemployment 
Overnight Index Swaps 
Purchasing Managers' Index 
Real Effective Exchange Rate 
Risk-Weighted Assets 
Stability and Growth Pact 
Value-Added Tax 

Central Bank of Russia 
Centraal Planbureau, the Netherlands Bureau for Economic Policy Analysis  
European Banking Authority 
European Central Bank 
European Financial Stabilisation Facility 
European Stability Mechanism 
Federal Reserve, US 
International Monetary Fund 
National Bank of Romania 
Non-financial institutions 
Office for Budget Responsibility, UK 
Organisation for Economic Cooperation and Development 
People's Bank of China 
Standard and Poor's 
World Trade Organisation 

Other abbreviations 

BCA 
BLS 
COLA 
CP 
DSGE 
FDI 
FLS 
FX 
FY 
JPA 
LFS 
LTRO 
MBS 
MRO 
OMT 
PAYG 
PPP 
QE 
QUEST   
SOEs 
VERP 

Budget Control Act, US 
Bank Lending Survey 
Cost-of-living allowance / Cost-of-living adjustment 
Convergence Programme 
Dynamic stochastic general equilibrium [model] 
Foreign Direct Investment 
Funding for Lending Scheme, UK 
Foreign Exchange 
Financial year 
Job Protection Act, Hungary 
Labour Force Survey 
Longer-Term Refinancing Operation 
Mortgage-Backed Securities 
Main Refinancing Operations 
Outright Monetary Transactions 
Pay As You Go [pension scheme] 
Public-Private Partnership 
Quantitative Easing 
Quarterly Estimation and Simulation Tool, DG ECFIN's DSGE model 
State-Owned Enterprises 
Voluntary Early Retirement Pension, Denmark 

Graphs/Tables/Units 

a.a. 
bbl  

Annual average 
Barrel 

iii 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
bn  
bps  
lhs  
rhs  
pp. / pps.  
pts  
Q  
q-o-q%   
y-o-y%   
SAAR 

Currencies 

EUR  
ECU  
EMU 
BGN  
CNY  
CZK  
DKK  
GBP  
HUF  
HRK  
ISK  
LTL  
LVL  
MKD  
NOK  
PLN  
RON  
RSD 
SEK  
CHF  
JPY  
TRY  
USD  

Billion 
Basis points 
Left hand scale 
Right hand scale 
Percentage point / points 
Points 
Quarter 
Quarter-on-quarter percentage change 
Year-on-year percentage change 
Seasonally-Adjusted Annual Rate 

Euro 
European currency unit 
Economic and Monetary Union 
Bulgarian lev  
Chinese yuan, renminbi  
Czech koruna  
Danish krone 
Pound sterling 
Hungarian forint  
Croatian kuna 
Icelandic krona 
Lithuanian litas  
Latvian lats  
Macedonian denar  
Norwegian krone 
Polish zloty  
New Romanian leu 
Serbian dinar  
Swedish krona 
Swiss franc 
Japanese yen 
Turkish lira  
US dollar 

iv 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
CONTENTS 

Overview 

PART I: 

Economic developments at the aggregated level 

The EU economy: Sailing through rough waters 
1.  A mild recovery ahead amid continued structural adjustment 
2. 
3. 
4. 
5.  Risks 

The external environment 
Financial markets in Europe 
The EU economy 

PART II: 

Prospects by individual economy 

Ireland: The road to recovery is still challenging 

The Czech Republic: Low consumption weighs on the economy 

Member States 
1.  Belgium: Fiscal consolidation amid a subdued growth outlook 
2.  Bulgaria: Domestic demand sustaining growth 
3. 
4.  Denmark: Muted growth in a phase of adjustment 
5.  Germany: Robust consumption despite uncertain environment 
6.  Estonia: Returning to balanced growth 
7. 
8.  Greece: Fiscal consolidation in the midst of internal adjustment 
9. 
10.  France: One more year of flat growth before recovery 
11.  Italy: Uncertainty and tight financing conditions delay recovery 
12.  Cyprus: Deep recession to prevail over the forecast horizon 
13.  Latvia: Growing fast again 
14.  Lithuania: Growth continues at a slower pace 
15.  Luxembourg: Approaching a crossroad 
16.  Hungary: Fiscal challenges amidst subdued growth prospects 
17.  Malta: Resilient labour market underpins gradual demand 

Spain: Deep adjustment continues 

1 

7 

9 
10 
11 
14 
16 
28 

47 

49 
50 
52 
54 
56 
58 
61 
63 
65 
67 
70 
73 
76 
78 
80 
82 
84 

recovery 

87 
89 
18.  The Netherlands: Slowly emerging from the doldrums 
92 
19.  Austria: A gradual return to normality 
20.  Poland: Growth slows down as domestic demand falters 
94 
21.  Portugal: Faster-than-expected rebalancing towards net exports  97 
99 
22.  Romania: Modest recovery ahead 
101 
23.  Slovenia: Deleveraging needs delay recovery 
24.  Slovakia: Economy still resilient but losing pace in 2013 
103 
25.  Finland: Growth losing pace, but labour market remaining strong  105 
26.  Sweden: Slowdown but no recession 
107 
27.  The United Kingdom: Subdued growth amid continuing 

uncertainty 

Acceding Countries 
28.  Croatia: Little growth but some fiscal consolidation 

109 

113 
114 

v 

Candidate Countries 
29.  The former Yugoslav Republic of Macedonia: From a moderate 

recession to an investment driven recovery 

30.  Iceland: Recovery on track amid risks and uncertainties 
31.  Montenegro: Seeking the restoration of the lending channel 
32.  Serbia: Recession followed by a sluggish recovery 
33.  Turkey: Growth slows down and rebalances away from 

consumption 

Other non-EU Countries 
34.  The United States of America: Subdued growth amid looming 

fiscal uncertainties 

35.  Japan: Recovery stalling after the solid first half of 2012 
36.  China: Mixed signals for the short term, while structural 

challenges remain 

37.  EFTA: Resilience put to the test 
38.  Russian Federation: Continuing on a moderate growth path 

Statistical Annex 

LIST OF TABLES 

117 

118 
120 
122 
124 

126 

129 

130 
133 

135 
137 
140 

145 

1. 
I.1. 
I.2. 
I.3. 
I.4. 
I.5. 
I.6. 
I.7. 
I.8. 

Overview - the autumn 2012 forecast 
1 
International environment 
12 
Main features of the autumn 2012 forecast - EU 
17 
Main features of the autumn 2012 forecast - euro area 
18 
Composition of growth - EU 
20 
Composition of growth - euro area 
21 
23 
Labour market outlook - euro area and EU 
General government budgetary position - euro area and EU  27 
28 
Euro-area debt dynamics 

LIST OF GRAPHS 

I.1. 
I.2. 
I.3. 
I.4. 

I.5. 
I.6. 
I.7. 

I.8. 

I.9. 
I.10. 

I.11. 

Real GDP, EU 
HICP, EU 
Current-account imbalances, euro area 
Multi-speed real GDP growth in the EU, annual growth rates 
(weighted) 
World trade and Global PMI manufacturing output 
Commodity-price developments 
Real GDP growth in EU, non-EU advanced and emerging 
economies 
Ten-year government-bond yields, selected euro-area 
Member States 
Stock-market indices, euro area 
Bank lending to households and non-financial corporations, 
euro area 
Net changes in credit standards and credit demand for 
loans to non-financial corporations, euro area 

9 
9 
10 

11 
12 
13 

13 

14 
15 

15 

16 

vi 

I.12. 
I.13. 

I.14. 
I.15. 
I.16. 
I.17. 
I.18. 
I.19. 
I.20. 
I.21. 
I.22. 
I.23. 
I.24. 
I.25. 
I.26. 
I.27. 

16 

GDP growth and its components, EU 
Economic Sentiment Indicator and PMI Composite Output 
17 
Index, EU 
18 
Real GDP growth , EU, contributions by Member States 
19 
Equipment investment and capacity utilisation, euro area 
19 
Construction investment and building permits, euro area 
20 
Private consumption and consumer confidence, euro area 
21 
Global demand, euro-area exports and new export orders 
22 
Current-account balances, euro area and Member States 
23 
Employment growth and unemployment rate, EU 
24 
Employment expectations, DG ECFIN surveys, euro area 
25 
HICP, euro area 
Inflation breakdown, EU 
26 
Producer Price Inflation and survey inflation expectations, EU  26 
27 
Budgetary developments, euro area 
General government revenues and expenditure, EU 
28 
Euro area GDP forecasts - Uncertainty linked to the balance 
of risks 

29 

LIST OF BOXES 

I.1. 
I.2. 

I.3. 

I.4. 

I.5. 
I.6. 

Ongoing adjustment in the euro-area periphery 
Assessing the impact of diverging financing conditions within 
the euro area 
The role of expectations and confidence indicators in short-
term forecasting 
Euro-area labour markets: less resilience and more 
divergence ahead? 
Forecast errors and multiplier uncertainty 
Some technical elements behind the forecast 

30 

34 

37 

39 
41 
45 

vii 

EDITORIAL 

The EU economy continues to deal with a difficult post-financial crisis correction, which bears heavily on 
its growth and employment performance. This forecast has been prepared against a mixed background of 
mostly  disappointing  hard  data  and  survey  indicators  since  our  spring  forecast,  encouraging  signs  of 
progressing economic adjustment in Member States and important policy advances. Wide cross-country 
divergences  in  economic  activity  and  labour  market  dynamics  have  opened,  originating  primarily  in 
varying needs for public- and private-sector deleveraging and for reallocation of resources across sectors, 
but also in large disparities in financing conditions. The distress in more vulnerable Member States has 
progressively started to affect the remainder of the Union.  

The aggravation of the sovereign-debt crisis in the first half of the year, with rising market concerns about 
the  long-term  viability  of  the  euro  area  and  negative  feedbacks  between  banks'  funding  pressures  and 
economic  activity,  and  to  a  lesser  extent  the  unexpected  slowdown  in  non-EU  GDP  growth  and  global 
trade, are the main reasons for the disappointing growth performance in 2012. Due to the weak starting 
point, the gradual recovery setting in in 2013 will result in a low annual GDP growth rate of ½% for 2013 
in the EU, while GDP in the euro area will remain unchanged. GDP growth is forecast to rise in 2014 to 
around  1½%  in  the  EU  and  the  euro  area,  with  domestic  demand  returning  to  provide  a  positive 
contribution to growth on the back of an expected normalisation of financing conditions, a stabilisation of 
sectoral balance sheets and returning confidence. The weak short-term growth outlook raises concerns for 
the labour markets, where a further rise in the already high unemployment rate next year appears likely. 
Bold reforms are needed to prevent a prolonged period of high unemployment, which would bring social 
hardship and a destruction of human capital detrimental to longer-term growth. 

Two  elements  instil  a  degree  of  moderate  optimism  going  forward.  First,  major  policy  decisions  have 
significantly  reduced  tail  risks  and  relieved  market  stress.  The  June  European  Council  decisions  were 
swiftly followed up with concrete progress towards establishing a Banking Union. The European Council 
of  18-19  October  agreed  on  a  timetable  for  the  establishment  of  a  Single  Supervisory  Mechanism  and 
advanced  further  on  the  deepening  of  EMU,  encompassing  the  financial,  budgetary,  economic,  and 
political  dimensions.  The  introduction  of  Outright  Monetary  Transactions  (OMTs)  by  the  ECB 
complemented these institutional efforts, contributing decisively to removing doubts about the integrity 
and viability of the euro area. As a result, funding constraints for the public and private sectors are easing 
up, although difficulties in parts of the banking sector are likely to continue to weigh on credit supply.  

Second, economic adjustment within the euro area is continuing. This is most visible in the reduction of 
large  current-account  deficits  driven  by  partly  permanent  declines  in  domestic  absorption  and  gains  in 
competitiveness, but is also apparent in gradually rising wages and domestic demand in surplus countries. 
Internal  and  external  adjustment  has  farther  to  go,  and  it  will  have  to  be  sustained  over  time  to  see  an 
impact on stocks of domestic and external liabilities. The speed and the short-term economic costs of the 
adjustment depend on the degree of wage and price flexibility within economies and on their capacity to 
reallocate resources across sectors. Continued structural reforms in deficit countries and a shift towards 
more domestic demand-based growth in surplus economies are expected to contribute to intra-euro-area 
rebalancing  in  the  coming  years.  By  boosting  confidence  and  providing  investors  with  a  longer-term 
perspective,  swift  progress  towards  completing  EMU's  architecture  would  help  overcome  market 
fragmentation, increase the incentive to invest in weaker economies and ensure more balanced financing 
conditions, hence supporting the process of rebalancing.   

  Marco Buti 
  Director General 
  Economic and Financial Affairs 

ix 

OVERVIEW

Moderate recovery
expected to start in 
2013  

The  ongoing  post-financial  crisis  correction  continues  to weigh heavily  on
economic  activity  and  employment in  the  EU.  In  the  first  half  of  2012, 
domestic  demand  has  continued  to  contract  while  the  global  economy has
also  slowed  down,  and  consumers  as well  as firms  have  become more
pessimistic  about  the  near-term  perspectives.  The  EU  economy has  dipped
back into contraction in the second quarter with further weakness expected in
the second half  of  the year.  Unemployment has  risen  and  cross-country 
divergences  have  widened.  Yet,  compared  with  the  situation  before  the 
summer, over the last few months financial tensions have somewhat abated.

A  return  to moderate  growth  is  projected  in  the  first half of  2013. The  full
implementation  of  far-reaching  policy measures  announced  over  recent
months  and  progress with the  correction  of  imbalances  should  reduce 
financial  stress  in  vulnerable  Member  States further  and lead  to  a  gradual
restoration  of  confidence  across  the  EU,  which  is  necessary for  investment
and private consumption to return. As the current weakness of global demand
is  expected  to  be  temporary,  net  exports  are  projected  to  provide  some

Table 1:

Overview - the autumn 2012 forecast

Real GDP
Autumn 2012
forecast

2011

2012 2013 2014

2011

Inflation
Autumn 2012
forecast
2012 2013 2014

Unemployment rate  

Autumn 2012
forecast
2012 2013 2014

2011

 Belgium

 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan
 China
 World

1.8

3.0

8.3

1.4

-7.1

0.4

1.7

0.4

0.5

1.7

1.9

1.0

2.7

-1.7

0.6

3.2

2.7

1.4

1.7

1.9

0.8

5.5

5.9

1.6

4.3

2.5

3.9

0.9

1.5

0.0

1.8

-0.8

9.2

3.8

-0.2

0.8

2.5

0.4

-6.0

-1.4

0.2

-2.3

-2.3

0.4

1.0

-0.3

0.8

-3.0

-2.3

2.6

0.1

-0.4

0.8

-1.3

0.6

4.3

2.9

-1.2

2.4

0.8

1.1

-0.3

-0.3

-1.9

2.1

2.0

7.7

3.1

0.7

0.8

3.1

1.1

-4.2

-1.4

0.4

-0.5

-1.7

0.7

1.6

0.3

0.9

-1.0

-1.6

2.0

0.8

0.1

1.4

0.8

1.6

3.6

3.1

0.3

1.8

2.2

1.9

0.9

0.4

0.0

2.3

0.8

7.7

3.3

1.6

2.0

4.0

2.2

0.6

0.8

1.2

0.8

-0.7

1.5

2.1

1.4

2.1

0.8

0.9

3.0

1.3

1.4

2.0

2.0

1.3

3.9

3.6

1.3

2.6

2.7

2.5

2.0

1.6

1.4

2.6

1.9

7.8

3.9

3.5

2.5

5.1

1.2

3.1

3.1

2.3

2.9

3.5

3.7

2.5

2.5

3.6

3.6

2.1

4.1

3.3

2.7

3.4

2.1

2.7

4.2

4.1

3.9

3.9

5.8

1.4

4.5

3.1

2.2

3.2

2.6

2.1

4.3

2.0

1.1

2.5

2.3

3.3

3.2

2.9

2.9

2.8

2.4

2.9

2.8

3.7

3.0

2.5

2.5

3.6

2.4

2.4

3.4

5.6

3.8

3.5

1.0

2.7

2.7

3.4

2.1

1.8

1.9

4.1

1.3

1.6

1.8

3.3

1.4

-0.8

-0.4

2.1

1.7

2.0

1.5

1.9

2.2

2.4

1.8

0.9

2.2

1.9

2.5

1.8

2.6

1.1

2.0

2.1

3.1

5.3

2.6

4.9

1.3

2.1

2.0

3.2

2.0

1.3

1.7

1.7

1.3

1.8

2.2

1.6

1.9

1.3

1.6

2.0

2.2

1.6

2.7

1.1

1.7

2.3

3.0

3.9

2.4

3.3

1.8

1.9

1.8

2.1

2.1

0.2

:

:

-0.3

5.4

:

-0.2

-0.1

:

:

:

:

7.2

5.9

12.5

14.4

17.7

21.7

9.6

8.4

7.9

4.8

6.5

4.4

4.2

12.9

8.2

13.6

7.8

10.1

11.3

6.7

7.6

16.2

15.4

10.9

9.7

7.4

7.5

8.0

9.7

13.5

8.9

4.6

:

:

7.5

5.5

10.5

14.8

23.6

25.1

10.2

10.6

12.1

5.4

6.3

5.4

4.5

15.5

8.5

13.5

7.9

11.3

12.7

7.0

7.7

15.2

13.5

10.8

10.1

7.4

7.5

7.9

10.5

14.2

8.2

4.8

:

:

7.7

5.6

9.8

14.7

24.0

26.6

10.7

11.5

13.1

6.4

6.3

6.1

4.7

16.4

9.3

13.5

8.1

11.8

12.7

7.3

7.7

14.3

12.4

10.8

10.5

7.3

7.4

8.0

10.9

13.9

7.9

4.7

:

:

7.8

5.5

9.0

14.2

22.2

26.1

10.7

11.8

13.9

6.4

6.2

6.2

4.2

15.9

9.6

13.1

8.0

11.7

12.5

7.1

7.6

12.7

10.9

10.6

10.3

7.3

6.9

7.8

10.7

12.9

7.5

4.6

:

:

1 

European Economic Forecast, Autumn 2012 

The global economy 
has decelerated …  

… and GDP in the EU 
has been falling 

Policy has helped 
calming financial 
markets… 

impetus for the recovery of investment, later spilling over to consumption.  

Domestic  demand  continues  to  be  held  back  by  the  legacy  of  the  crisis  of 
2008-09  as  households,  banks  and  sovereigns  are  simultaneously  reducing 
their leverage. At the same time, resources in countries that ran large current-
account deficits before the crisis need to be reallocated from the production 
of  goods  and  services  for  domestic  consumption  towards  tradables.  As  this 
adjustment  is  progressing,  an  improvement  of  deficit  countries'  economic 
performance is expected to lead to some growth convergence towards the end 
of the forecast horizon. 

Global  GDP  growth  has  lost  steam  in  the  course  of  2012,  and  leading 
indicators point to further weakness in the remainder of this year. Among the 
largest  non-EU  advanced  economies,  Japan's  post-disaster  recovery  is 
pausing,  while  in  the  US  growth  appears  to  be  gradually  firming  after  a 
protracted period of subdued performance. However, the  uncertainty related 
to the path of US fiscal policy over the coming months remains high. At the 
same  time,  many  emerging  market  economies  have  recently  been  moving 
towards a more moderate rate of economic expansion, which in part reflects 
the  slowdown  in  the  EU  and  other  advanced  economies,  but  also  domestic 
weakness.  With  growth  set  to  strengthen  gradually  in  non-EU  advanced 
economies  and  expected  to  become  more  balanced  in  emerging  markets, 
world  growth  outside  the  EU  is  projected  to  go  through  a  soft  patch  rather 
than a prolonged period of weakness and to recover somewhat in the course 
of  2013  reaching  an  annual  rate  of  4%.  A  further  moderate  acceleration  is 
projected  for  2014.  In  line  with  global  GDP,  world  trade  growth  has  been 
decelerating through 2012, but is expected to recover gradually in 2013 and 
2014.  

In Europe, economic sentiment resumed its decline, dropping significantly in 
the summer months. After stagnation in the first quarter of 2012, the EU and 
euro-area economies contracted in the second quarter reflecting a decrease in 
domestic  demand  and  lower  net  export  growth.  Unemployment  increased 
further, in particular in the countries that  were hardest hit  by the sovereign-
debt crisis. Available hard data and leading indicators point to a weak second 
half of the  year. For 2012 as  a  whole,  GDP is now  expected to contract by 
¼% in the EU and almost ½% in the euro area. 

After  a  few  months  of  respite  brought  about  mainly  by  the  provision  of 
longer-term  liquidity  by  the  Eurosystem  in  early  2012,  the  sovereign-debt 
crisis intensified again in spring. However, financial markets have recovered 
since  July,  helped  by  important  policy  decisions  in  the  EU  and  the 
announcement  of  further  monetary  easing  on  both  sides  of  the  Atlantic. 
Sovereign yields in most vulnerable countries have receded somewhat since 
summer.  Risk  appetite  appears  to  have  improved  as  stock  markets  have 
recuperated  the  losses  experienced  earlier  in  the  year.  The  ECB  measures 
explicitly aim at repairing the  monetary transmission  mechanism. However, 
data available for the euro area so far do not show any easing of credit supply 
conditions for the private sector. 

… preparing the 
ground for modest 
growth to resume in 
the course of 2013 …  

Conditional  on  the  assumption  that  the  policy  measures  agreed  at  EU  and 
Member-State levels will be implemented smoothly and that this will lead to 
a  gradual  restoration  of  confidence,  GDP  in  the  EU  and  the  euro  area  is 
expected  to  start  growing  again  after  the  turn  of  the  year  and  progressively 
move towards a moderate expansion. Given the weak starting point, GDP in 
2013 as a whole is projected to grow by only  ½% in the EU and to remain 

2 

… with net exports as 
main driver …  

… and domestic 
demand set to 
recover only slowly 

Unemployment to rise 
further in 2013 

Growth differentials 
across Member States 
remain substantial …  

broadly  stable  in  the  euro  area.  The  legacy  of  the  deep  financial  and 
sovereign-debt crisis  will continue to  weigh on the pace of growth over the 
forecast  horizon.  However,  positive  results  from  the  ongoing  adjustment  of 
imbalances  and  recently  undertaken  structural  reforms  are  expected  to  start 
materialising  in  2014.  Growth  in  2014  is  therefore  expected  to  be  more 
robust  and  also  better  balanced.  Nonetheless,  at  a  projected  rate  of  1½%  in 
both the EU and the euro area, it will remain well below pre-crisis levels. 

Domestic demand has made negative contributions to GDP growth for more 
than a year and is likely to do so also in the second half of 2012 and well into 
the first half of 2013. This leaves net exports, which are set to benefit from a 
gradual recovery of global demand, as the only positive contributor to GDP 
growth in the EU for some more quarters to come.  

Private  consumption,  by  far  the  largest  component  of  domestic  demand,  is 
expected to stagnate in the EU and to decrease  in the euro area in 2013, as 
real disposable incomes remain under pressure from a further contraction of 
employment,  low  real  wage  growth  and  higher  taxes.  Households  are  on 
average  not  expected  to  reduce  their  savings  in  the  downturn.  In  fact,  the 
downward  pressure  on  the  saving  rate  stemming  from  consumption 
smoothing  and  a  growing  proportion  of  households  that  find  it  hard  to  put 
money aside is expected to be offset by higher precautionary savings and the 
continued need in some Member States to reduce a high level of household 
debt.  

In  line  with  the  ongoing  fiscal  consolidation,  government  consumption  is 
expected  to  contract  moderately  in  2013.  There  are  somewhat  better 
prospects for an earlier recovery of investment. Gross fixed capital formation 
has  been  held  back  by  overcapacities  and  the  worsening  outlook  for  GDP. 
However,  with  low  financing  costs  in  the  EU  as  a  whole  and  good  self-
financing  capacities  of  non-financial  corporations,  equipment  investment  is 
set  to  pick  up  supported  by  the  expected  recovery  of  global  demand  and 
restoration  of  confidence  in  the  EU.  This  being  said,  tight  credit  supply 
conditions in some Member States are likely to limit the projected expansion 
of domestic demand there.  

The slowdown is set to affect employment with the usual lags. Employment 
in the EU is projected to contract by another ¼% in 2013 after a fall of ½% 
this  year,  also  because  firms  now  have  less  scope  to  react  to  the  demand 
shortfall by reducing working hours than during the 2008-09 recession. With 
the  projected  turnaround  of  GDP  growth  in  2013,  employment  should 
stabilise  towards  the  end  of  next  year.  However,  the  moderate  growth 
projected  for  2014  will  generate  only  modest  employment  gains,  which  are 
expected to remain below the employment losses incurred in 2012 and 2013. 
Unemployment  is  thus  expected  to  peak  at  11%  in  the  EU  and  12%  in  the 
euro area in 2013 before falling back slightly in 2014.  

Member  States'  performance  is  set  to  differ  strongly  this  year  and  next. 
Heterogeneity  in  GDP  and  employment  developments  results  from  varying 
adjustment  needs  following  the  imbalances  in  the  run-up  to  the  crisis.  In 
particular, the health of banking sectors and public finances as well as private 
debt  and  external  deficits  differ  considerably  across  countries.  While  being 
low for the EU as a whole, financing costs have continued to diverge across 
Member  States.  However,  due  to  the  pervasive  interconnections  within  the 
EU and especially the euro area, no country is expected to power ahead in a 
permanent decoupling.  

Overview 

3 

European Economic Forecast, Autumn 2012 

… as adjustment is 
gradually proceeding 
…  

… and fiscal 
consolidation 
advances  

Inflation set to 
decrease slowly 

4 

The German economy is expected to slow down further in the second half of 
2012, reflecting weaker economic activity in export markets and uncertainty 
weighing on investment, before accelerating moderately next year, thanks to 
relatively robust consumption and benign financial conditions. The projection 
for France is for a very modest growth in 2013 as domestic demand is set to 
strengthen only very gradually while the contribution of net exports is likely 
to remain  small. In Italy, the  contraction of economic activity  is forecast to 
last  until  mid-2013  before domestic  demand  slowly  recovers,  helped  by  the 
expected improvement in financing conditions and a return of confidence. As 
the  Spanish  economy  is  working  its  way  through  the  rebalancing  process, 
domestic demand is expected to remain depressed before picking up towards 
the  end  of  the  forecast  horizon,  while  external  trade  continues  to  provide 
some relief. Ongoing deleveraging is also set to weigh on domestic demand 
in  the  Netherlands,  where  GDP  growth  is  expected  to  remain  subdued  in 
2013 before accelerating somewhat in the outer forecast year.  

Among the largest Member States outside the euro area, the United Kingdom
is  expected  to  see  an  improvement  in  disposable  incomes  and  financing 
conditions, which should allow a gradual return of domestic demand growth 
in  2013  and  an  acceleration  in  2014.  For  Poland,  a  deceleration  from 
previous  growth rates is projected as external headwinds  and the stagnation 
in the labour market take their toll.  

the 

The  adjustment  of  the  remaining  imbalances  is  subject  to  a  number  of 
challenging interdependencies such as the feedback loop between banks and 
sovereigns, 
impact  on  domestic  demand  of  simultaneous  debt 
deleveraging  in  several  sectors  and  difficult  conditions  for  financing  the 
necessary  shift  of  resources  towards  the  production  of  tradable  goods  and 
services.  Nonetheless,  adjustment  is  moving  ahead,  underpinned  by  a 
reduction in domestic demand in deficit countries that is partly cyclical and 
partly structural as well as gradual changes in relative costs and prices across 
sectors  and  countries.  Progress  with  adjustment  is  expected  to  contribute  to 
some convergence of growth rates towards the end of the forecast horizon.  

Despite the deterioration of the economic situation in 2012, fiscal deficits are 
still expected to fall to 3½% of GDP in the EU and 3¼% in the euro area on 
the  back  of  consolidation  plans  implemented  in  the  course  of  the  year.  The 
available  information  from  budgets  for  2013  points  to  continued,  though 
somewhat  slower,  consolidation  with  headline  deficits  projected  at  3¼%  of 
GDP in the EU and 2½% in the euro area. A moderate decrease in the pace of 
fiscal  consolidation  is  also  reflected  in  the  structural  improvements  of  the 
budget  balance,  which  in  the  EU  is  expected  at  1 pp.  of  GDP  in  2012  and 
¾ pp.  in  2013,  and  in  the  euro  area  at  1¼ pps.  and  just  below  1 pp., 
respectively. The growth effect of a given consolidation effort depends on a 
number of factors (such as the composition of the fiscal effort, the credibility 
of the adjustment and financing conditions of the private sector), and it may 
currently  be  larger  than  in  normal  times  in  countries  hit  hard  by  the 
sovereign-debt crisis. The design of fiscal measures as well as their credible 
medium-term orientation are crucial to mitigate this impact.  

Consumer price inflation has persisted at around 2¾% in the EU and 2½% in 
the  euro  area  in  recent  quarters,  with  energy  prices,  indirect  taxes  and 
administered  prices  as  main  drivers.  In  very  volatile  commodities  markets, 
crude  oil  prices  (in  euro)  are  again  close  to  record  highs,  while  food 
commodity prices temporarily surged over the summer as draughts in major 
production  regions  caused  supply  concerns.  Commodity  prices  are  however 

Tail risks have receded  

assumed to decrease gradually over the forecast horizon, and their impact on 
inflation is projected to decline. Similarly, based on the current information 
about  budget  plans,  the  fiscal  impact  on  prices  should  fade.  Producer  price 
developments  suggest  indeed  that  inflationary  pressures  are  decreasing. 
Looking  further  ahead,  projected  GDP  growth  and  wage  increases  are  too 
modest  to  create  inflationary  pressures.  Consumer-price  inflation  is  now 
projected to decrease to 2% in the EU and 1¾% in the euro area in 2013 with 
a further modest decline in 2014.  

Overall,  risks  to  GDP  growth  appear  more  balanced  than  at  the  time  of  the 
spring  forecast,  but  are  still  skewed  to  the  downside.  While  some  of  the 
previously identified risks have materialised, most notably before the summer 
the  worsening  of  the  sovereign-debt  crisis,  policy  decisions  taken  over  the 
past months have also reduced tail risks. 

Nonetheless, a resurgent aggravation of the sovereign-debt crisis  with grave 
consequences for growth and financial stability remains the largest downside 
risk. This remains intrinsically linked to the risk of slippage or delay with the 
implementation  of  policy  measures  agreed  at  EU/euro-area  and  Member-
State levels. A downside risk also stems from labour markets, where a deeper 
drop in employment would weigh on growth prospects going forward. On the 
external  side,  the  baseline  of  a  soft  patch  in  global  GDP  growth  could  be 
challenged  by  a  sharper-than-expected  slowdown  in  emerging  market 
economies  or  the  materialisation  of  the  "fiscal  cliff"  in  the  US  with  large 
confidence  spillovers.  On  the  upside,  the  implementation  of  recent  policy 
decisions  could  lead  to  financial  market  stress  in  the  EU  fading  faster  than 
projected, and confidence rebounding  more strongly,  with  a positive impact 
on the dynamism of domestic demand.  

Risks to the inflation outlook continue to be broadly balanced. Inflation could 
turn  out  lower  if  the  large  and  persistent  output  gap  had  a  stronger  impact 
than expected on core inflation. On the upside, further energy-price increases 
in  an  uncertain  geopolitical  environment  and  fiscal  measures  that  are  not 
included in the no-policy-change baseline could lead to higher inflation.  

Overview 

5 

PART I 
Economic developments at the aggregated 
level 

THE EU ECONOMY: SAILING THROUGH ROUGH WATERS 

After  a  tentative  stabilisation  during  the  first  three  months  of  the  year,  following  a  contraction  in  the 
fourth quarter of 2011, the economic situation in the EU remains fragile. Output declined in the period 
between  April  and  June  and  economic  activity  is  expected  to  be  weak  in  the  near  future.  Alongside 
home-grown  impediments  to  growth  such  as  the  sovereign-debt  crisis  in  the  euro  area  and  the 
repercussions of external and internal imbalances, the slowdown in the world economy has contributed 
to the deterioration. 

Against this backdrop, and assuming that policy actions at the European and Member-State level will 
continue  to  rein  in  the  sovereign-debt  crisis,  thus  allowing  an  easing  of  financing  conditions  and  a 
return of confidence, the EU economy is expected to stabilise at the turn of the year and to embark on a 
moderate recovery path thereafter. With strong internal headwinds holding back domestic demand, net 
exports are likely to remain the most important growth driver next year. Although external demand is 
projected  to  increase  only  gradually,  coinciding  with  a  gentle  reacceleration  in  global  trade,  export 
growth  will  be  supported  by  competitiveness  gains  in  some  Member  States.  Further  ahead,  slowly 
returning confidence and easing financing conditions are expected to gradually prop up investment and 
private consumption, but weak labour markets and ongoing fiscal consolidation will continue to weigh 
on domestic demand over the forecast horizon. Overall, the EU economy is expected to contract by ¼% 
this  year,  followed  by  subdued  annual  growth  in  2013  (½%)  and  an  expansion  of  1½%  in  2014  (see 
Graph I.1). 

Consumer-price inflation in the EU is projected to remain relatively high in 2012 (2.7%), inter alia due 
to the impact of fiscal measures, but is expected to abate gradually over the forecast horizon, averaging 
2.0% and 1.8% in 2013 and 2014 respectively (see Graph I.2). 

Pronounced cross-country divergences will remain a defining feature of the outlook. They span across a 
number of dimensions – including financing conditions, the labour market  situation and the need for, 
and  advancement  of,  private  and  public-debt  deleveraging.  Current-account  adjustment  is  forecast  to 
continue, especially in Member States with large pre-crisis deficits. This adjustment is partly the result 
of the cyclical downturn, but is also increasingly supported by the continuing deleveraging of the public 
and private sector and structural reforms. The first positive effects of these structural developments on 
growth are likely to become visible towards the end of the forecast horizon. 

Overall, the central projections foresee a very gradual return to growth, to set in only next year. This 
outlook is still surrounded by high uncertainty and subject to substantial downside risks. However, due 
mainly  to  recent  policy  progress  and  improvements  in  financial  markets,  overall  risks  are  more 
balanced  than  in  last spring  but  are  still  tilted  to  the  downside.  Risks  to  the  inflation  outlook  appear 
broadly balanced. 

Graph I.1:Real GDP, EU

Graph I.2:HICP, EU

q-o-q%

3.2

0.3

index, 2007=100

forecast
0.4

-0.3

1.5

1.6

2.1

-4.3

100

95

%

2.4

4

3

2

1

0

3.1

2.1

1.0

3.7

index, 2005=100

1.8

2.0

2.7

forecast

130

125

120

115

110

07

08

09

10

11

12

13

14

07

08

09

10

11

12

13

14

GDP growth rate (lhs)
GDP (quarterly), index (rhs)
GDP (annual), index (rhs)

HICP inflation (annual rate) (lhs)

HICP index (monthly) (rhs)

HICP index (annual) (rhs)

Figures above horizontal bars are annual growth rates.

Figures above horizontal bars are annual inflation rates.

1

0

-1

-2

-3

9 

9

8

7

6

5

4

3

2

1

0

European Economic Forecast, Autumn 2012

1.

A  MILD  RECOVERY  AHEAD  AMID 
CONTINUED STRUCTURAL ADJUSTMENT 

Graph I.3:Current-account imbalances, euro area

300

EUR bn

% of GDP

200

100

0

-100

-200

-300

Since  the  second  half  of  2011,  economic  growth
has  been weakening  in  both the  EU  and  the  euro
area. In both areas real GDP is around ½% below
its  last  peak  of  spring  2011 when  a  significant
number  of Member  States  had  not yet  fully 
recovered  their  pre-crisis  output  levels.  In fact,
occasional  backslides  are  not  an uncommon 
crisis
phenomenon 
recoveries.  But  at  the  current  juncture,  several
Member  States,  particularly  in  the  euro  area,  face 
internal  and
structural  challenges 
growth
external 
impediments  linked  to  the  legacy  of the  global
financial  crisis  and  compounded  by  the  current
global slowdown.

to 
alongside 

imbalances (1) 

post-financial 

related 

during 

Internal and external adjustment is advancing

The  large  internal  and  external  imbalances  that
were  built  up  in  the  years  prior  to  2007/08  are
being  reduced  but  the  adjustment will  have  to
progress  further  and  needs  to  be  sustained  over
time  (see  also  Box I.1). (2) In  countries  with large
external net liabilities, current-account deficits are
being corrected (see Graph I.3), helped by falls in
wages  and  relative  unit  labour  costs,  even  though 
the  recorded  decline  in unit  labour  costs  in some
Member  States  partly  results from  increasing 
labour  productivity  due  to  the  shedding  of  low-
skilled workers. (3)

In parallel with the adjustment in deficit countries,
the  external  balances  of surplus  countries  are 
declining, albeit at a much slower pace. However, 
the increasing weight of domestic demand and the
relatively high wage  rises  in  surplus  countries
suggest that the adjustment process within the euro 
area is not fully asymmetric.

(1) External imbalances are reflected by unsustainable current-
account  balances,  whereas  internal imbalances  relate  to
budget  deficits and  public debt  but  also  to  large  debt
overhangs in the private sector.

(2) See Vogel, L., Structural reforms and external rebalancing 
in  the  euro  area:  A  model-based  analysis,  European 
Economy, Economic Papers, No. 443, July 2011. 

(3) For  an analysis  of  the determinants underlying  recent unit
labour  cost  developments  see  Darvas,  Z.,  Compositional
effects on productivity, labour cost and export adjustment,
Bruegel Policy Contribution 11, June 2012.

10

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

FR
EL
IT
NL
Euro area

DE
IE
PT
ES
St. dev. (rhs)

…but  it  will  continue  to  weigh  on  short-term
growth.

in 

to 

the 

tradable  sector  and 

Balance-sheet  adjustments 
the  household, 
corporate  and  government sector  are  expected  to 
shape  the  outlook  over  the  forecast  horizon. (4)
Regaining price competitiveness in the context of a
monetary union  implies  changes  in  relative  prices
which would  induce  a  shift  of  resources from  the
non-tradable 
the 
switching of expenditure to domestically-produced
goods. (5)  However, 
to  be
associated  with  output  contractions  and  rising 
unemployment, at least in the short-term, as wages
and  prices  tend  to  adjust  only  gradually.  But
ongoing 
industry level
triggered by structural reforms is expected to lend
additional  support  to  adjustment  by  strengthening 
non-price competitiveness.

restructuring  on 

these  shifts 

tend 

the 

Further  fiscal  consolidation  is  set  to facilitate  the
needed reallocation of resources, even though it is
likely  to  continue  to weigh  on  short-term growth
prospects  in several  Member  States. (6)  Fiscal

(4) Until 2011  the  corporate  sector  accounted  for  the  major 
part  of  private-sector  adjustment  in  vulnerable  Member
States.  For  an  analysis  of  the  drivers  of  balance-sheet
adjustment in the corporate sector see for example Ruscher,
E.  and  G.  Wolff,  Corporate  balance  sheet  adjustment: 
facts,  causes  and consequences, European 
Stylised 
Economy, Economic Papers, No. 449, February 2012.
(5) See  Dong,  W.,  The  role  of  expenditure  switching  in  the
global  imbalance  adjustment, Journal  of  International
Economics, Vol. 86, No. 2, March 2012, pp. 237-251.
(6) Given  that  construction  and  services  account  for  a  large 
in  government
part  of  public  expenditure,  cutbacks 
spending  tend  to  lower  the  relative  price  of non-tradable
goods.

deficits  are  being  reduced  and  reforms  to  the 
institutional fiscal framework at both the European 
and  national  level  are  expected  to  contribute  to 
lower structural deficits in the future. 

Recent  policy  measures  are  easing  financial 
market stress…  

to 

to  move 

conditions 

financial  market 

On  the  policy  side,  recent  measures  aimed  at 
stabilising 
and 
alleviating negative feedback loops between banks 
and  sovereigns  are  also  contributing 
the 
adjustment process in vulnerable countries. Policy 
measures on the European level,  most notably the 
decision 
towards  a  banking  union 
reflected  by  the  legislative  proposal  for  a  single 
supervisory  mechanism  (SSM)  for  the  euro  area, 
the  entry  into  force  of  the  European  Stability 
Mechanism  (ESM),  and  the  ECB  decision  to 
undertake  Outright  Monetary  Transactions 
(OMTs) in secondary markets for sovereign bonds 
of euro-area Member States have helped to relieve 
market 
tensions.  Conditional  on  measures 
implemented  at  the  national  level,  these  policy 
initiatives  will  also  support  fiscal  consolidation 
and private-sector deleveraging. But irrespective of 
the  progress  already  achieved  on  the  policy  side, 
the  experience  of  the  past  two  years  shows  that 
reversals  of  sentiment  can  happen  very  rapidly  if 
the implementation of measures falters. 

…and pave the way for a moderate and multi-
speed recovery  

The gradual reacceleration of the global economy, 
easing financial stress and the progressive return of 
confidence  will  allow  the  euro  area  and  the  EU 
economy to start growing again in 2013. 

Positive  results  from  structural  reforms  and 
internal  and  external  adjustment  are  expected  to 
materialise  only  gradually,  but  are 
to 
become  visible  towards  the  end  of  the  forecast 
horizon. 
in 
competitiveness  and  productivity  in  vulnerable 
Member  States  should  lift  the  EU  economy  to  a 
slightly higher growth path. (7)

sustained  gains 

In  particular, 

likely 

The divergence in GDP growth rates amongst EU 
countries  is  expected  to  decrease,  but  not  to 

(7)  There  is  evidence  that  private-sector  deleveraging  during 
downturns  associated  with  financial  crises  has  a  positive 
impact  on  the  strength  of  the  subsequent  recovery  see 
Bech,  M.  L.,  L.  Gambacorta  and  E.  Kharroubi,  Monetary 
policy  in  a  downturn:  Are  financial  crises  special?,  BIS 
Working Papers, No. 388, September 2012. 

Economic developments at the aggregated level 

disappear,  over 
the  forecast  horizon.  As  a 
consequence, countries  which recovered relatively 
quickly  after  the  2008-09  recession  will  continue 
to outpace countries with below-average growth in 
recent years (see Graph I.4). 

further  competitiveness  gains 

The  expected  narrowing  of  growth  differentials 
relies  on 
in 
vulnerable  countries  and  reduced  disparities  in 
financing conditions to the extent that tail risks in 
the euro area dissipate. 

Graph I.4:Multi-speed real GDP growth in the  EU, 
annual growth rates (weighted)

forecast

3.5

%

2.5

1.5

0.5

-0.5

-1.5

2010

2011

2012

2013

2014

Member States with below-average growth in 2011

Member States with above-average growth in 2011

2. 

THE EXTERNAL ENVIRONMENT 

A weakening global recovery, … 

The  global  economy  has  slowed  down  in  the 
second  quarter  of  2012  after  solid  growth  in  the 
first  three  months  before.  On  the  one  hand, 
economic  activity  in  advanced  economies  is  still 
impeded by the repercussions of debt and financial 
crises. In the US, GDP growth decelerated over the 
first  half  of  this  year,  but  labour  and  housing 
market  developments  indicate  that  it  is  likely  to 
pick  up  at  the  turn  of  the  year.  However,  for 
growth  to  be  sustained,  the  brunt  of  the  looming 
fiscal  contraction  will  have  to  be  reduced.  On  the 
other hand, economic activity lost momentum in a 
number  of  emerging  market  economies.  Those 
economies  were 
by 
weaknesses in export markets and lower domestic 
demand, partly resulting from policy tightening in 
response to increasing price pressures and signs of 
overheating in 2011. 

increasingly 

affected 

Global  trade  decelerated  in  the  first  half  of  2012 
and lost further momentum in recent months on the 
back  of  weakening  economic  activity,  notably  in 

11 

European Economic Forecast, Autumn 2012

Table I.1:

International environment

  (Annual percentage change)

  USA
  Japan
  Asia (excl. Japan)
    - China
    - India
  Latin America
    - Brazil
  MENA
  CIS
    - Russia
  Sub-Saharan Africa
  Acc./Candidate Countries
  World (incl. EU)

  World import growth 
  Extra EU export market growth

( a )

2009

2010

2011

2012

2013

2014

2012

2013

Real GDP growth

Autumn 2012
   forecast

     Spring 2012
          forecast

19.2

5.7

28.9

14.6

5.8

8.8

3.0

5.1

4.2

3.0

2.5

1.4

100.0

-3.1

-5.5

6.3

9.2

8.4

-1.8

-0.3

2.2

-6.7

-7.8

2.6

-4.9

-0.3

-12.5

-11.0

2.4

4.5

9.0

10.3

8.4

6.1

7.5

4.5

4.8

4.3

5.2

7.5

5.1

15.5

13.7

1.8

-0.8

7.3

9.2

7.2

4.5

2.7

4.4

4.8

4.3

4.6

7.4

3.8

2.1

2.0

6.2

7.7

5.0

2.9

1.5

3.2

3.8

3.7

5.0

2.4

3.1

2.3

0.8

6.3

7.7

5.8

3.7

3.9

3.1

4.0

3.9

5.0

2.6

3.3

World merchandise trade volumes

7.7

7.9

3.5

1.8

4.3

3.4

2.6

1.9

6.7

7.8

6.6

4.4

4.0

3.8

4.3

4.0

5.5

3.5

3.9

5.9

5.5

2.0

1.9

6.9

8.4

6.8

3.6

3.1

3.1

3.7

3.6

4.5

2.8

3.3

4.1

5.7

2.1

1.7

7.0

8.2

7.5

4.0

4.2

3.4

3.9

3.8

5.0

4.2

3.7

5.7

6.5

  (a)  Relative weights in %, based on GDP (at constant prices and PPS) in 2009.

the euro area and Japan. Non-EU trade is expected
to  grow  by  around  5%  in  2012  and  2013,  before 
picking-up at an annual rate of close to 6%.

Graph I.5:World trade and Global PMI
manufacturing output

y-o-y%

3-month moving average

25
20
15
10
5
0
-5
-10
-15
-20

70

60

50

40

30

00 01 02 03 04 05 06 07 08 09 10 11 12

World trade volume, CPB data (lhs)

Global PMI manufacturing output (rhs)

Looking  ahead,  high-frequency  global indicators
are  pointing  to  subdued  global  growth  in  the  near 
future.  In  the  third  quarter,  the  global  composite
Purchasing Managers' Index (PMI) remained at its
three-year  low  reached  in  the  second  quarter  (see 
Graph I.5).  The  latest  reading  suggests  a  modest
acceleration  in  economic  activity,  but  the  index 
masks the  diverging  trends  of manufacturing  and
services.  While  global manufacturing  decreased 
for the  fourth consecutive  month,  global  services
continued 
to weaken until  July,  but  have
rebounded since then.

Against  this  backdrop,  annual  growth  of  global
GDP  (excluding  the  EU)  in 2012  is  expected  to
slow to 4% from 4½% in 2011. Given that non-EU
advanced  countries  continue  on  their  moderate
expansion  path  on  average,  this  deceleration  is
linked  to  the  weakening  in  BRICS  countries,
notably Brazil, India and China. 

Looking further ahead, non-EU growth is expected
to remain subdued in the first months of 2013 and 
to  pick  up  some momentum in  the  following
quarters. This projection is based on lower growth
expectations than in spring across almost all major 
economic regions. Overall, non-EU  world GDP is
estimated to expand by 4% in 2013 and by 4½% in
2014.

…slightly lower but volatile commodity prices...

After  rebounding  in  early  2012  most commodity 
prices decreased in the second quarter of 2012. Oil
prices  dropped  sharply from their  peak  in  March 
2012, as supply concerns eased and global demand
declined. Due to lower oil consumption in the EU 
and to a lesser extent in the US and China, average
crude oil (Brent) prices fell below USD 100/bbl. in
June, but picked up again since then reflecting the
Iranian oil embargo as well as supply risks related
to other geopolitical tensions.

On an annual basis, oil prices (Brent) are projected
to average 112.5 USD/bbl in 2012, 109.1 USD/bbl

12

Economic developments at the aggregated level 

in  2013  and  103.1  USD/bbl 
Graph I.6). (8)

in  2014  (see 

remains  a  drag  on  confidence  and  growth  and 
weighs on the outlook in the near future. 

Graph I.6:Commodity-price developments

140

USD/barrel, quarterly data

index, 2005=100

120

100

80

60

40

assumptions

210

190

170

150

130

110

90

08

09

10

11

12

13

14

Brent crude oil (lhs), assumption (annual average, a.a.)

Non-energy commodities* (rhs), assumption (a.a.)

* ECFIN calculations

On  average,  prices  of  most  non-oil  commodities
are  expected  to  decline  moderately  over  the 
forecast horizon. Food prices fell strongly until the 
spring of 2012, but increased temporarily for most 
in  summer  as  adverse 
cereals  and  soybeans 
weather  conditions  in  the  US  and  Eastern  Europe 
raised supply concerns. Prices of agricultural non-
food  commodities,  metals  and  minerals  remained 
weak  in  the  first  half  of  2012,  but  the  latter  are 
expected to recover in 2013. 

…and declining global inflation. 

Despite  recent  hikes  in  energy  and  food  prices
global  inflation  has  continued  to  ease.  Across 
advanced economies, inflation pressures are  set to 
be  constrained  on  account  of  slow  growth,  weak 
domestic demand and declining commodity prices. 
Likewise,  inflation  in  most  emerging  market 
economies  is  falling,  reflecting  subdued  global 
demand. 

Growth  in  advanced  countries  will  remain 
subdued… 

After a relatively robust economic expansion at the 
beginning of 2012 growth in advanced economies 
outside  the  EU  has  moderated  in  the  second 
quarter. Domestic headwinds in terms of structural 
imbalances  related  to  high  public  and  private 
sector  debt  prevail  and  will  continue  to  weigh  on 
consumption  growth  in  particular.  In  the  US, 
uncertainty  about  fiscal  policies  going  forward 

(8)  Oil  price  assumptions 

in  euro 

87.3 EUR/bbl, 
respectively. 

83.9 EUR/bbl 

terms  correspond 
and 

to 
79.3 EUR/bbl 

Monetary  policy  in  most  advanced  economies 
remains  accommodative  and  geared  to  maintain 
historically-low  interest  rates.  The  US  Federal 
Reserve announced the third round of quantitative 
easing in September, under which it will buy USD 
40 bn 
in  agency  mortgage-backed  securities 
(MBS)  per  month  for  an  unspecified  period, 
its  debt 
lengthening  maturities  of 
continue 
holdings  under  the  "Operation  Twist"  (until  end-
2012)  and  extended  the  commitment  to  keep 
interest rates at historically low levels (0 to ¼%) at 
least until mid-2015. The Bank of Japan has set an 
target  of  1%  and  provided  further 
inflation 
monetary  stimulus  by  expanding  the  size  of  its 
asset  purchase  programmes  in  an  effort  to  fight 
persistent deflationary trends. 

On average, growth in non-EU advanced countries 
is  forecast  to  increase  by  around  2¼%  in  2012, 
followed  by  a  GDP  expansion  of  2%  in  2013.  In 
2014,  GDP  is  projected  to  accelerate  slightly  to 
2½% (see Graph I.7). 

Graph I.7:Real GDP growth in EU, non-EU advanced 
and emerging economies

%

forecast

2010

2011

2012

2013

2014

EU

Non-EU advanced economies

Emerging and developing countries

8

7

6

5

4

3

2

1

0

-1

… while economic activity in emerging market 
economies is likely to reaccelerate in 2013. 

compensate 

The short-term outlook for major emerging market 
economies  has  weakened.  Countries  have  not 
escaped  the  slowdown  in  advanced  economies, 
since domestic demand was not sufficiently strong 
export  growth. 
to 
Additionally, a number of emerging markets were 
affected  by  domestic  headwinds  that  hampered 
consumption and investment growth. However, oil 
producers benefited to some extent from recent oil 
price hikes. 

lower 

for 

13 

European Economic Forecast, Autumn 2012 

After  policy  tightening  in  2011,  monetary  and 
fiscal  policy  has  again  shifted  to  an  expansionary 
stance  in  order  to  counteract  the  current  growth 
slowdown.  Economic  activity  in  emerging  market 
economies  (and  developing  countries)  is  thus 
expected to reaccelerate in the course of 2013 and 
to  gain  further  traction  in  2014. (9)  However,  their 
contribution  to  global  growth  will  be  probably 
lower 
than  previously  expected  as  emerging 
market  economies  may  have  been  growing  above 
potential  for  some  time. (10)  For  2012,  GDP  is 
predicted  to  grow  at  a  rate  of  5%,  slightly  lower 
than  forecast 
in  spring.  In  2013  and  2014 
economic activity is expected to increase by 5¼% 
and 5¾% respectively. 

As a result of subdued growth in the EU and other 
important export  markets, output expansion  in the 
group  of  acceding  and candidate  countries (11)  in 
2012 is expected to decelerate. But in line with the 
mild  recovery  expected  to  set  in  next  year, 
economic  activity  is  to  become  slightly  more 
dynamic  with  growth  rates  of  around  2½%  and 
3½% in 2013 and 2014 respectively. However, the 
aggregate  figure  masks  heterogeneous  growth 
patterns at the country level. 

3. 

FINANCIAL MARKETS IN EUROPE 

Narrowing  sovereign-yield  spreads  within  the 
euro area…   

Throughout  2012  varying  concerns  about  the 
resolution of the sovereign-debt crisis have shaped 
developments in European financial markets. This 
was  most  visible 
in  sovereign-bond  yields 
increasing  substantially  for  some  countries,  while 
safe-haven  capital  flows  were  pushing  benchmark 
sovereign-bond yields to new historical troughs in 
Germany  and  some  other  Member  States.  Since 
mid-2012 however, financial market tensions have 
started  to  ease,  first  following  the  meeting  of  the 

(9)  However,  easy  monetary  conditions  and  the  resulting 
historically  low  level  of  interest  rates  in  some  countries 
have  raised  concerns  that  households'  saving  incentives 
might  be  unduly  lowered  and  financial  institutions'  credit 
allocation might prove increasingly inefficient. 

(10)  For  example,  medium-term  output 

levels  for  major 
emerging  market  economies  have  recently  been  revised 
down,  see  IMF,  World  Economic  Outlook,  October  2012, 
p. 18. 

(11)  For  detailed  forecasts  of  Croatia  (acceding  country)  and 
Former  Yugoslav  Republic  of  Macedonia, 
Iceland, 
Montenegro, Serbia and Turkey (candidate countries), refer 
to pp. 114-27. 

14 

European  Council  in  June  2012  that  outlined 
conditions  for  direct  bank  recapitalisation  by  the 
ESM  and  a  roadmap  for  strengthening  EMU 
governance.  Then,  the  ECB's  announcement  to 
purchase  government  debt  in  order  to  ensure  the 
functioning  of  monetary  transmission  and  the 
layout  of  modalities  for  such  actions  (OMTs)  in 
early September exerted a longer-lasting impact on 
yields and yield spreads. Benchmark yields moved 
up  and  at  both  the  short  and  the  long  end  of  the 
yield  curve  spreads  narrowed  considerably.  But 
despite  the  announcement  of  these  extraordinary 
policy  measures, 
collateral 
constraints and OMTs in particular, and its positive 
impact on sovereign yields in vulnerable countries, 
conditions  in  sovereign  bond  markets  remained 
exceptionally strained with an elevated volatility of 
spreads (see Graph I.8). 

easing  of 

the 

Graph I.8:Ten-year government-bond yields, selected 
euro-area Member States

%

16

12

8

4

0

 09

 10

 11

 12

DE

PT

IT

IE

ES

FR

… and increasing stock market prices ... 

Since late July, stock markets in the euro area have 
responded  favourably  to  statements  by  policy-
makers  regarding  their  commitment  to  take  the 
steps necessary to resolve the crisis and strengthen 
financial  stability.  But  market  developments  also 
reflected expectations of  monetary stimulus in the 
United  States,  China  and  the  euro  area  (see 
Graph I.9). 

These factors offset downward pressures on prices 
from  the  deteriorating  growth  outlook  for  both 
emerging  and  developed  economies.  At  the  same 
time,  stock  market  uncertainty,  as  measured  by 
implied volatility, declined. On the forecast cut-off 
date  of  19  October,  the  Eurostoxx50  stood  10% 
higher  than  at  the  end  of  last  year,  while  the 
financial sub-index was up by 11%. 

Economic developments at the aggregated level 

Graph I.9:Stock-market indices, euro area

120

index, Jan. 2007=100

month  Euribor which  fell  to  0.20%  (October  19) 
from about 1.60% in the autumn of 2011.

100

80

60

40

20

 07

 08

 09

 10

 11

 12

EuroSTOXX (financials)

EuroSTOXX 50

… mirror recent policy decisions. 

the 

crisis 

sovereign-debt 

While 
impacted
negatively  on  the funding  situation  of  banks,
several  policy measures  dampened  its  adverse
effect  on  the  cost  and  volume  of  lending to 
households.  In  July,  the  ECB  cut  the  rate  on  its
main refinancing operations by 25 bps to a record
low  of  0.75%.  Also  the  deposit  rate  (to  0%)  and 
the  marginal  lending facility  rate  (to  1.5%)  were
lowered  by  the  same margin.  While  the  rate  cut
reduced  banks'  borrowing  costs with  the  ECB for 
long-term
both 
refinancing (12),  the  cut  in  the  marginal  lending
facility  rate  is  likely  to  be  particularly  beneficial
for stressed banks.

outstanding 

new 

and 

The  aforementioned  new  ECB  bond  purchase
scheme  is  conditional  upon an  ESM  programme
subject to strict and effective conditionality (either
a  full  adjustment  programme  or  a  precautionary
programme such  as  the  Enhanced  Conditions 
Credit Line). No ex ante quantitative limits are set
on the size of OMTs, transactions will be focused
on sovereign bonds with one-to-three year maturity 
and  for  all  future  bond  purchases  the  Eurosystem 
intends  to  accept  the  same (pari  passu)  creditor
status as private investors. (13)

These  measures  add  to  the  3-year  longer-term 
refinancing  operations  (LTROs)  settled  on  22
December 2011 and 1 March 2012 that had already
provided euro-area banks with substantial amounts
of liquidity. The positive impact of these measures
is  also  reflected  by  the  evolution  of  the  three-

(12) The  rate  in  the LTROs  is  fixed  at  the  average rate  of  the 
main refinancing operations over the life of the respective
operation. 

(13) See  ECB  press  release  of  6  September  2012  ("Technical

features of Outright Monetary Transactions").

Difficulties  in  the  banking  sector  still  weigh  on
bank lending …

In  the  EU  banking  sector,  structural  funding  and
liquidity problems persist. This is characterised by
difficult  market  access for  several  banks  and
limited  new issuances,  which  can  only  partly  be
explained  by  reduced  funding needs  during  the
deleveraging  process.  As  long  as  an  active  cross-
border  interbank market within  the  EU  on  a  non-
collateralised  basis  has  not  yet  re-emerged,  many
EU banks have to rely on short-term funding on a
collateralised  basis from  national  central  banks. 
This  has  resulted  in  a  significant  increase  in  the
amount of encumbered assets in the balance sheets
of banks that make extensive use of covered bonds 
for mortgage  refinancing  or  rely  to  a  large  extent
on  funding  by  the  Eurosystem. At  the  same  time,
internal funding  has  come under  pressure  due  to
the 
financial 
institutions implied by deleveraging but also by the
need to set up accruals and the reduced level of net
interest and other income.

earnings-potential  of

reduced 

Graph I.10:Bank lending to households and 
non-financial corporations, euro area

y-o-y%

15

12

9

6

3

0

-3

-6

00

01

02

03

04

05

06

07

08

09

10

11

12

GDP
Loans to households
Loans to non-financial corporations

Growth  in  bank  lending  to  the  private  sector
weakened  further  up to  August  in  the euro  area, 
with the  annual  growth  rate  of  credit  falling  to
-1.2%,  down from -0.9%  in  July  and  -0.6%  in
June. Among the components, loans to the private
sector  fell  by  0.2%  (adjusted  for  loan  sales  and 
securitisation)  after  recording moderate  annual
increases 
to
households grew  at  an  annual  rate  of  only  1.0%
(adjusted),  mainly  reflecting  the  deterioration  in
economic  and  housing market  prospects  and,  in  a 
number  of  euro-area  countries, 
to
deleverage following past excesses. Loans to non-

in  preceding  months.  Loans 

the  need 

15

European Economic Forecast, Autumn 2012

financial corporations shrank by 0.5% (by 0.2% in 
July)  reflecting weakening  economic  activity  and
the associated higher credit risk (see Graph I.10).

As  regards  lending  conditions,  the  July  Bank
Lending  Survey  (BLS)  by  the  ECB  indicated  a 
broadly  stable net  tightening  of  banks’  credit
standards  for  loans  to  enterprises  at  the  euro-area
level  in  the  second  quarter  of  the  year  compared 
with the first quarter and even a deceleration in net
tightening  for  loans  to households.  However,
banks'  credit  standards  remained  tight  in  the  euro 
area. For the period ahead, banks in the euro area 
expected  a  similar  degree  of  net  tightening  in
credit  standards  to  enterprises  and  a  considerably
smaller  decline  in net  demand  for  corporate  loans 
(see Graph I.11).

40

20

0

-20

-40

Graph I.11:Net changes in credit standards and credit
demand for loans to non-financial corporations, euro
area

balance

balance

(cid:87)(cid:76)(cid:74)(cid:75)(cid:87)(cid:72)(cid:81)(cid:76)(cid:81)(cid:74) (cid:3)(cid:313)

(cid:315)(cid:3)(cid:72)(cid:68)(cid:86)(cid:76)(cid:81)(cid:74)

(cid:71)(cid:72)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:3)(cid:315)

(cid:76)(cid:81)(cid:70)(cid:85)(cid:72)(cid:68)(cid:86)(cid:72)(cid:3)(cid:313)(cid:3)

03

04

05

06

07

08

09

10

11

12

Credit standards - past 3 months (lhs)

Credit standards - next 3 months (lhs)

Credit demand - past 3 months (rhs)

Credit demand - next 3 months (rhs)

100

80

60

40

20

0

-20

-40

…  and  differences 
across Member States remain substantial.

financing  conditions 

in 

The  sovereign-debt  crisis has widened  the  gap  in
financing conditions across euro-area countries. In
particular,  non-financial  corporations  in  countries
with  stressed  sovereign-debt  markets  tend  to  face
significantly higher interest rates on loans. This is
particularly  relevant  for  small  and  medium-sized
enterprises  that  are  less  likely to  issue  corporate
bonds.  As  a  result,  the  funding  capacity  of  the
private  sector,  particularly  firms  in  periphery
countries, is considerably impaired (see Box I.2).

In  some  Member  States,  firms'  abundant  internal
sources of financing and shifts from bank lending 
to  bond  issuance  in  the  light  of  the  favourable 
financing  conditions  are  also  contributing  to  the
weakness  of  lending  volumes.  Moreover,  loan
demand  remained weak  in  vulnerable  countries,
owing  to  heightened  uncertainty,  low  confidence

16

the  high 

to  correct 

and  a  need 
levels  of 
indebtedness  in  the  private  sector.  Particularly  in
these  countries,  constraints  on  the  balance  sheets
of  banks  continued  to  constrain  credit  supply.
Overall,  the widening  heterogeneity  in  credit
conditions  across  euro-area  Member  States
remains  a  major  challenge  for  monetary policy
transmission.

4. 

THE EU ECONOMY

After  a  temporary  stabilisation  in  the  first  three
months of 2012, GDP contracted by 0.2% q-o-q in
the  second  quarter  in  both  the  EU  and  the  euro 
area.  Weaker  global  growth and  the  re-escalation 
of the sovereign-debt crisis in spring contributed to
the  worsening  in  the  economic  situation, while
financial  markets  remained  fragile  despite  the
injections
Eurosystem's 
(LTROs).  But  economic  activity  has  already  been 
weakening  since  the  second half  of  2011  as  the 
positive  contributions  from  net  exports  were
increasingly less able to offset the negative impact
from  declining  household  consumption  and
shrinking investment (see Graph I.12). 

longer-term liquidity 

Graph I.12:GDP growth and its components, EU

pps.

6

4

2

0

-2

-4

-6

forecast

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Private consumption

Government consumption

Investment

Inventories

Net exports

GDP (y-o-y%)

Short-term weakness…

The  gradual  and  fragile  recovery  in  business  and
consumer  confidence  at  the  beginning  of  the  year
halted  in  spring  and  early  indicators  are  now
suggesting  a  weak  second  half of  the  year. In
September,  the  euro-area  PMI  Composite  Output
Index stood at 46.1, signalling a decline in output
for  the  eighth  successive month.  The  Economic
Sentiment  Indicator  (ESI)  decreased  further  in
September  in  both  the  EU  and  the  euro  area, 
falling  to  its  lowest  level  since  September  2009
(see  Graph I.13).  The  observed  worsening  in
survey  indicators  is,  however,  somewhat  at  odds

Economic developments at the aggregated level 

with  recent  releases  of hard  data,  which seem  to
indicate a bottoming-out in the second quarter with 
industrial  production up  by 1%  in  both  the  euro
area  and  the  EU  in  July-August  compared  to  the
second quarter. 

Graph I.13:Economic Sentiment Indicator and
PMI Composite Output Index, EU

3-month moving average (ma)

3-month ma

120

110

100

90

80

70

60

60

50

40

30

00 01 02 03 04 05 06 07 08 09 10 11 12

Economic Sentiment Indicator (lhs)

PMI Composite Output Index(rhs)

the  gradual  recovery 

On  balance, 
that  was
previously  expected  to  materialise  in  the  second
half  of  2012  is  likely  to  be  shifted  into  the  next
year.  For  the  year  2012  as  a  whole,  the  GDP
outcome  is  expected  to  be worse  than forecast  in 
spring, with  predicted  output  contractions  of  ¼%
and ½% in the EU and the euro area respectively.

level,  the  EU  economy  is expected  to  halt  its
downward trend around the turn of the year and to 
pick up gradually in the course of 2013. A crucial
prerequisite  of  the  recovery  is  the  stabilisation  of
business and consumer sentiment and its expected 
positive  impact  on  consumption  and  investment
over  the  forecast  horizon (see Box  I.3).  This
notwithstanding, net  exports will  be  the  most
visible  growth  driver  in  2013.  On  the  back  of  a
global economy  gaining  momentum, Member
States are likely to benefit from the depreciation in
the  nominal  effective  exchange  rate in  2012  and 
gains  in  competitiveness.  Strengthening  external
demand  and  higher  export  growth might  also
induce  positive  spill-over  effects  for  gross  fixed
capital formation. Furthermore, investment should
benefit  from  improving  business  sentiment  and 
gradually easing financing conditions in vulnerable
Member  States.  The  recovery  is  expected  to  gain 
further traction over the forecast horizon helped by 
abating inflation  and  its favourable  effect  on  real
disposable income and consumption growth.

However, substantial deleveraging and an anaemic
labour market will continue to weigh on prospects 
over the forecast horizon. Overall, GDP in the euro
area  is  expected  to  remain  broadly unchanged  in
2013, while a tepid expansion (½%) is forecast for 
the EU.

…followed by a moderate recovery… 

Resting  on  the  assumption that  adopted  policy
measures to  combat  the  sovereign-debt  crisis  are
fully  implemented  at  the  European  and  national

Further  out,  moderate  GDP  growth  is forecast for 
2014. Slowly improving labour market conditions,
rising  purchasing  power  and  higher  consumer 
confidence  should  help  to  prop  up  household 
consumption and shift growth drivers more toward

Table I.2:

Main features of the autumn 2012 forecast - EU

  (Real annual percentage change
   unless otherwise stated)

  GDP 
  Private consumption
  Public consumption
  Total investment
  Employment
  Unemployment rate (a)
  Inflation (b)
  Government balance  (% GDP)
  Government debt  (% GDP)
  Adjusted current-account balance  (% GDP)

  Domestic demand
  Inventories
  Net exports

Autumn 2012
    forecast

Spring 2012
  forecast

2009
-4.3

2010
2.1

2011
1.5

2012
-0.3

2013
0.4

2014
1.6

2012
0.0

2013
1.3

-1.5

2.2

-13.0

-1.9

9.0

1.0

-6.9

74.6

-0.7

-3.1

-1.1

-0.1

1.1

0.7

0.2

-0.5

9.7

2.1

-6.5

80.2

-0.6

0.1

-0.1

1.4

0.2

9.7

3.1

-4.4

83.0

-0.5

-0.6

0.0

-2.2

-0.4

10.5

2.7

-3.6

86.8

-0.2

Contribution to change in GDP

0.8

0.8

0.5

0.3

0.3

1.0

-0.7

-0.5

0.9

0.0

-0.4

0.1

-0.2

10.9

2.0

-3.2

88.5

0.4

0.0

0.0

0.5

1.2

0.4

2.8

0.6

10.7

1.8

-2.9

88.6

0.6

1.3

0.0

0.3

-0.3

-0.5

-0.9

-0.2

10.3

2.6

-3.6

86.2

-0.4

-0.4

-0.3

0.7

0.7

-0.1

2.2

0.2

10.3

1.9

-3.3

87.2

0.0

0.8

0.0

0.4

    (a)  Percentage of the labour force.    (b)  Harmonised index of consumer prices, annual percentage change.

17

European Economic Forecast, Autumn 2012

domestic  demand.  Moreover,  some  initial  effects
of  structural  reforms  are  expected  to  become
visible  in  2014.  Overall,  real  GDP  is  projected  to
grow by around 1½% in 2014. The negative output
gap is expected to widen until 2013 and to shrink 
only  in  2014.  This  has  to be  seen  against  the
background  of low  estimates  for  potential  GDP
growth  in  2012-13  (around ½% for  the  euro  area 
and slightly higher for the EU).

…while  cross-country  growth  differences 
narrow only gradually.

Despite 
the  ongoing  adjustment,  substantial
structural  reforms  and  some  noticeable  gains  in
competitiveness  in  several  countries with  current-
account  deficits,  cross-country  growth  differences
are  expected  to  narrow  only marginally  over  the
forecast  horizon.  Different  economic  prospects  of 
Member  States  are  path-dependent,  and  country-
specific  contributions  to  real  GDP  growth  in  the
EU  are  to  a  large  part  determined  by  varying 
staring  points  in  terms  of  private  and  public
non-price 
indebtedness, 
competitiveness,  the  stability  of  the  domestic
banking  sector  and  the  prior  existence  of  housing 
bubbles (see Graph I.14).

price- 

and 

Member  States that  recovered  solidly  after  the
recession  of  2008-09  will  continue  to  outpace 
more  vulnerable  countries  given  the  profound 
differences between countries in terms of external
and  internal  adjustment  needs,  the  labour  market
situation,  and  in  their  capability  to  base  export 
growth  on  extra-EU  demand,  while  differences  in

in 

financing conditions will take time to be reduced.
At  the  same  time,  achievements  and  further
terms  of  structural  reforms  and 
progress 
sustained  gains  in  competitiveness  and  fiscal
consolidation  in  a  number  of  Member  States 
should  lay  the  basis  for  reducing  macroeconomic
disparities towards the end of the forecast horizon.

2.5

2.0

1.5

1.0

0.5

0.0

-0.5

-1.0

pps.

2.1%

Graph I.14:Real GDP growth , EU, 
contributions by Member States

forecast

1.5%

1.6%

0.4%

-0.3%

2010

2011

2012

2013

2014

DE

FR

UK

PL

SE

AT

NL

BE

Others

Fixed  investment  growth  set  to  turn  positive
only in 2014… 

In the second quarter of 2012, total investment had
moved back to the level of the last trough reached
at the turn of the year 2009-10. After a temporary
rebound,  investment has  been  declining  since
summer  2011  and  the  contraction  is  expected  to
continue until the end of this year. 

Table I.3:

Main features of the autumn 2012 forecast - euro area

  (Real annual percentage change
   unless otherwise stated)

  GDP 
  Private consumption
  Public consumption
  Total investment
  Employment
  Unemployment rate (a)
  Inflation (b)
  Government balance  (% GDP)
  Government debt  (% GDP)
  Adjusted current-account balance  (% GDP)

  Domestic demand
  Inventories
  Net exports

Autumn 2012
    forecast

Spring 2012
  forecast

2009
-4.4

2010
2.0

2011
1.4

2012
-0.4

2013
0.1

2014
1.4

2012
-0.3

2013
1.0

-1.0

2.6

-12.7

-2.1

9.6

0.3

-6.3

80.0

-0.2

-2.8

-1.0

-0.7

0.9

0.7

-0.1

-0.6

10.1

1.6

-6.2

85.6

-0.1

0.1

-0.1

1.5

0.2

10.1

2.7

-4.1

88.1

0.0

-1.0

-0.2

-3.5

-0.8

11.3

2.5

-3.3

92.9

0.9

Contribution to change in GDP

0.7

0.6

0.7

0.3

0.2

0.9

-1.3

-0.5

1.3

-0.4

-0.4

-0.6

-0.5

11.8

1.8

-2.6

94.5

1.2

-0.4

-0.1

0.6

1.0

0.6

2.5

0.4

11.7

1.6

-2.5

94.3

1.3

1.2

0.0

0.2

-0.6

-0.8

-1.5

-0.5

11.0

2.4

-3.2

91.8

0.1

-0.8

-0.3

0.8

0.5

0.0

1.9

0.0

11.0

1.8

-2.9

92.6

0.6

0.7

0.0

0.4

    (a)  Percentage of the labour force.    (b)  Harmonised index of consumer prices, annual percentage change.

18

Economic developments at the aggregated level 

to 

in 

the  near 

improvement 

in several Member States, the ongoing adjustment
in  housing  markets  continues 
impact  on
residential  investment (14)  and  timely  indicators 
such  as  building  permits  do  not  suggest  any
substantial 
future.
Construction  investment  is expected  to  further
decline in 2013 in the euro area and to stabilise in
the EU (see Graph I.16). However, very favourable
financing  conditions  in  terms  of  historically  low
mortgage  rates 
for
example  in  Germany,  are  likely  to  increase  the
affordability  of  housing  and  support  housing 
investment.  Further  ahead, with  the  detrimental
impact from  price  corrections  in  housing  markets
waning,  construction  investment  is  predicted  to
turn modestly positive. However, contractions will
persist  in  countries  facing  the  strongest  housing
market corrections, notably Spain and Ireland.

in some Member  States,

8

4

0

-4

-8

-12

86
84
82
80
78
76
74
72
70
68

Graph I.16:Construction investment and building
permits, euro area

y-o-y%

y-o-y%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Construction investment (lhs)

Construction investment, forecast (annual data, lhs)

Building permits (rhs)

20

10

0

-10

-20

-30

-40

Looking  ahead,  total  investment  is  expected  to
pick  up  as  from  the  beginning  of  2013  in  the  EU
and somewhat later in the year in the euro area, led 
by non-construction  investment.  It  should  benefit
from  higher  external  demand,  but  also  from
improving  business  sentiment,  easing  financing
conditions  and  a  recovery  of  profit  margins. 
Moreover,  the  realisation  of  investment  projects 
postponed  in  the  times  of  elevated  uncertainty  is
also  expected 
to  benefit  gross  fixed  capital 
formation.  In  annual  terms,  gross fixed  capital
formation  in  2013  is  set  to  further  contract  by
about  ½% in the  euro  area  and  to  remain  broadly
stable  in  the  EU.  In  2014,  total  investment
is
expected to accelerate to 2½% in the euro area and 
to 2¾% in the EU. 

…  with  equipment  investment  expected  to 
recover over the forecast horizon … 

The  decrease  in  equipment  investment  that  set  in 
last year accelerated in the first half of 2012. In the
remainder of 2012, non-construction investment is
expected  to  shrink  further  in  line  with weak 
economic activity and high uncertainty. Alongside
the  uncertainty  weighing on  investment spending
in all Member States, tight financing conditions are
an  additional  burden 
to investment  growth,
particularly  in  vulnerable  countries.  Moreover,  a 
further  decline 
capacity  utilisation  was
registered  in  the  third  quarter  of  2012  (see 
Graph I.15)  signalling weak  investment  dynamics
in the  near future. Other downside  factors include
very  low  business  confidence,  meagre  profits
developments  in most  Member  States  as well  as
companies'  deleveraging  in  vulnerable  Member 
States.

in

8

0

-8

-16

-24

Graph I.15:Equipment investment and capacity
utilisation, euro area

%

%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Equipment investment (y-o-y%, lhs)
Equipment investment, annual growth, forecast (lhs)
Capacity utilisation rate (rhs)

Given  the  relatively  limited  restocking  after  the
2008-09 crisis and the large negative contributions
from inventories to EU and euro-area GDP growth
since  the  third  quarter  of 2011,  the  scope  for 
further  destocking  appears  to  be  narrow  at  the
current 
to Commission 
surveys,  companies'  stocks  are  below  long-term
averages and slowly increasing which suggests that
the  inventory  cycle may  have  turned  around.
Therefore,  for  the  second  half  of  the  year,  the
contributions  of inventories  to  EU  and  euro-area
GDP growth are expected to be close to zero.

juncture. According 

…while  adjustment  in  the  housing  market  are
still weighing on construction investment. 

Unlike  machinery  and  equipment  expenditure,
investment in construction has witnessed an almost
uninterrupted  decline  in  the  EU  and  the  euro  area
since 2008. Following the burst of housing bubbles 

(14) By  the  end  of  2011,  e.g.  the  Spanish  housing  market  was
still  burdened  by  a  stock  of  676.038  unsold  new  housing
units and in the first quarter of 2012 still about 3000 more
units were completed than sold according to statistics of the
Spanish ministry of public works (Ministerio de Fomento). 

19

European Economic Forecast, Autumn 2012

Private  consumption  constrained  by  negative 
income and employment developments… 

Private consumption  has remained  weak  since the
beginning of 2011. Muted growth in compensation 
of  employees,  in  combination with  persistently
high  inflation, has  been weighing  on households'
real  gross  disposable  incomes  –  the  key  driver  of 
private  consumption  growth  in  the  EU.  Likewise,
the  high  uncertainty  related  to  the  euro-area
sovereign-debt  crisis  has
to 
savings.  These 
increase 
headwinds  are  expected  to  remain  in  place  in  the 
second  half  of  2012  and  short-term  indicators 
suggest weak near-term prospects. Growth in retail
trade  has  been  on  a  downward  trend  since  the 
beginning  of  2011  and  confidence  in  the  retail
sector is at its lowest level since 2009.

their  precautionary 

led  households 

5

0

-5

-10

-15

-20

-25

-30

-35

Graph I.17:Private consumption 
and consumer confidence, euro area

y-o-y %

balance

4

3

2

1

0

-1

-2

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Private consumption (lhs)
Private consumption , forecast (annual data, lhs)
Consumer confidence (rhs)

Table I.4:

Composition of growth - EU

  (Real annual percentage change)

New passenger car registrations have been steadily
declining  for  several  quarters,  and  are  likely  to
remain subdued,  as  suggested  by  the  Commission 
survey  on  expected  major  purchases which  are  at 
historically 
consumer 
low levels.  Finally, 
confidence  in the  EU  and  the  euro  area  has  been 
declining  since  mid-2011  and  is  now  below  its 
long-term  average  (see  Graph I.17).  Overall  in 
2012,  private  consumption  is  forecast  to  fall  by
½% in the EU and by 1% in the euro area.

…but  will  start  to  rebound  when  adverse
effects fade… 

Private consumption growth in 2013 is expected to
remain  sluggish  or  negative  in  most  Member
States. An anaemic labour market and flat income
growth, 
fiscal
substantial  deleveraging  and 
consolidation will continue to weigh on household 
consumption.  On  aggregate,  private  consumption 
in 2013 is expected to contract further in the euro 
area and to remain stable in the EU, before picking 
up moderately by around 1% in 2014 in both areas,
as  real  disposable  incomes rise  and  confidence 
returns.  The  assumed  return of  confidence  should
help  to  lower  households'  precautionary  savings 
and the expected moderation in HICP inflation, in
combination with the stabilisation in labour market
conditions in  2014,  should  support  households' 
purchasing power.

in  aggregate  private
However,  developments 
consumption  over 
the  forecast  horizon mask
substantial cross-country differences. In vulnerable 

Autumn 2012
   forecast

2011

2007

2008

2009

2010

2011

2012

2013

2014

bn Euro curr. prices

% GDP

Real percentage change

  Private consumption
  Public consumption
  Gross fixed capital formation
  Change in stocks as % of GDP
  Exports of goods and services
  Final demand
  Imports of goods and services
  GDP
  GNI
  p.m. GDP euro area

7341.8

2745.2

2348.6

77.2

5525.0

18037.9

5378.3

12659.6

12652.5

9420.9

58.0

21.7

18.6

0.6

43.6

142.5

42.5

100.0

99.9

74.4

  Private consumption
  Public consumption
  Investment
  Inventories
  Exports
  Final demand
  Imports (minus) 
  Net exports

20

2.2

1.8

6.3

0.9

5.7

4.0

5.9

3.2

3.0

3.0

1.3

0.4

1.3

0.4

2.2

5.5

-2.3

-0.1

0.3

2.3

-1.2

0.6

1.6

0.6

1.1

0.3

0.1

0.4

0.2

0.5

-0.2

-0.2

0.6

0.8

-0.4

0.2

-1.5

2.2

-13.0

-0.4

-11.6

-6.4

-11.6

-4.3

-4.2

-4.4

1.1

0.7

0.2

0.4

10.7

4.1

9.6

2.1

2.2

2.0

0.1

-0.1

1.4

0.7

6.4

2.3

4.1

1.5

1.4

1.4

Contribution to change in GDP

-0.9

0.5

-2.7

-1.1

-4.8

-9.0

4.8

-0.1

0.6

0.2

0.0

0.8

4.0

5.6

-3.5

0.5

0.1

0.0

0.3

0.3

2.6

3.2

-1.6

1.0

-0.6

0.0

-2.2

0.1

2.2

-0.2

0.1

-0.3

-0.5

-0.4

-0.3

0.0

-0.4

-0.5

1.0

-0.3

0.0

0.9

0.0

-0.4

0.1

0.1

3.4

1.0

2.4

0.4

0.5

0.1

0.0

-0.1

0.0

0.0

1.5

1.4

-1.0

0.5

1.2

0.4

2.8

0.1

5.3

2.6

4.9

1.6

1.6

1.4

0.7

0.1

0.5

0.0

2.4

3.8

-2.2

0.3

the  contraction 

Member  States 
in  private
consumption  is forecast  to  be  deeper  and  longer-
than the  EU  average,  since  private
lasting 
households  continue  to  reduce  debt  and  increase
savings.  This  deleveraging  process  is  expected  to
continue over the  forecast horizon and is likely to 
prevent more  buoyant  consumption  growth  at  the
EU  aggregate  level.  By  contrast,  countries with
lower household debt are expected to register more 
solid  growth 
in  consumer  expenditure  as
precautionary savings  are  likely  to  decline  in  line
with receding uncertainty.

…whereas  fiscal  consolidation  continues  to
weigh on public consumption … 

In  line with fiscal  consolidation  efforts  in many
Member  States,  public  consumption  is  set  to  be
subdued  over  the  forecast  horizon.  In  2012,
government consumption is forecast to fall slightly
in the euro area and to remain broadly stable in the
EU.  In  2013,  fiscal  retrenchment  is  forecast  to
lower public consumption by a further ½% before 
government  consumption  is predicted  to  increase 
modestly  in  both  areas  in  2014,  based  on  the  no-
policy-change assumption,

Net exports will continue to be the main growth 
driver in 2013…

With  domestic  demand  depressed,  net  exports  are 
likely  to  be  the  key growth  driver  in  2012  and
2013.  After  buoyant growth  in  2010  and  at  the
beginning  of  2011,  export  growth  has  been 

Table I.5:

Composition of growth - euro area

  (Real annual percentage change)

Economic developments at the aggregated level 

in 

imports,  net external  demand 

decelerating since spring 2011 in line with slowing 
world trade. With export growth still exceeding the
is
increase 
expected  to  contribute  positively  to  GDP growth
over  the  forecast  horizon. This  positive  growth
contribution 
to  decline 
is  however  predicted 
gradually as strengthening domestic demand is set
to induce higher import growth.

Graph I.18:Global demand, euro-area exports and
new export orders

3-month moving average

64

57

50

43

36

29

12

%

8

4

0

-4

-8

-12

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Exports (q-o-q%, lhs)
Exports forecast (annual data, y-o-y%, lhs)
Output index (Global PMI composite, rhs)
New export orders (PMI Manuf., euro area, rhs)

The  recent  softening  of  global  growth  is  likely  to 
last  until  the  end  of  the  year  on  the  back  of  the
subdued  outlook for  both  advanced  and  emerging
market  economies.  As  a consequence,  export 
growth is set to slow down in the remainder of the
year.  Short-term  indicators such  as Commission 
the  PMI 
survey  data  on  export  orders  or 
the
component
manufacturing sector continue to decline. For 2012
as a whole, exports are set to grow by 2¼% in the

for  new export  orders 

in 

Autumn 2012
   forecast

2011

2007

2008

2009

2010

2011

2012

2013

2014

bn Euro curr. prices

% GDP

Real percentage change

  Private consumption
  Public consumption
  Gross fixed capital formation
  Change in stocks as % of GDP
  Exports of goods and services
  Final demand
  Imports of goods and services
  GDP
  GNI
  p.m. GDP EU

5406.8

2030.9

1805.3

40.9

4149.4

13433.3

4012.4

9420.9

9420.2

12659.6

57.4

21.6

19.2

0.4

44.0

142.6

42.6

100.0

100.0

134.4

  Private consumption
  Public consumption
  Investment
  Inventories
  Exports
  Final demand
  Imports (minus) 
  Net exports

1.7

2.2

5.2

0.8

6.6

3.9

6.3

3.0

2.6

3.2

0.9

0.4

1.1

0.3

2.7

5.5

-2.5

0.2

0.4

2.3

-1.4

0.7

1.1

0.6

0.9

0.4

-0.2

0.3

0.2

0.5

-0.3

-0.1

0.5

0.8

-0.4

0.1

-1.0

2.6

-12.7

-0.3

-12.4

-6.3

-11.1

-4.4

-4.0

-4.3

0.9

0.7

-0.1

0.3

11.2

4.1

9.6

2.0

2.2

2.1

0.1

-0.1

1.5

0.6

6.3

2.3

4.2

1.4

1.3

1.5

Contribution to change in GDP

-0.6

0.5

-2.7

-1.0

-5.2

-8.9

4.6

-0.7

0.5

0.2

0.0

0.6

4.1

5.5

-3.4

0.7

0.1

0.0

0.3

0.2

2.6

3.2

-1.7

0.9

-1.0

-0.2

-3.5

-0.1

2.5

-0.5

-0.5

-0.4

-0.5

-0.3

-0.6

-0.1

-0.7

-0.5

1.1

-0.7

0.2

1.3

-0.4

-0.4

-0.6

-0.1

3.2

0.7

2.1

0.1

0.0

0.4

-0.2

-0.1

-0.1

-0.1

1.5

1.0

-0.9

0.6

1.0

0.6

2.5

-0.1

5.2

2.5

5.0

1.4

1.3

1.6

0.6

0.1

0.5

0.0

2.4

3.6

-2.2

0.2

21

European Economic Forecast, Autumn 2012 

EU and by 2½% the euro area, compared to 6.4% 
and 6.3% in 2011 respectively (see Graph I.18). 

2% of GDP on average over the period 2012-14 (at 
around 1% in the euro area). 

With the global economy gaining momentum over 
the  course  of  2013  and  with  Member  States 
benefitting  from  a  lower  effective  exchange  rate 
and gains in competitiveness, a gradual rebound in 
export  growth  is  expected  over  the  forecast 
horizon.  Export  growth  in  2013  as  a  whole  is 
predicted  to  accelerate  modestly  to  around  3¼%. 
In  2014,  export  growth  is  expected  to  be  more 
robust  (around  5¼%  in  both  areas),  in  line  with 
global  demand  developments.  However,  Member 
States' individual export performance will to some 
extent  depend  on  the  elasticities  of  exports  to 
specific markets, notably emerging Asia. (15)

The  short-term  prospects  for  EU  imports  are 
restrained  by  weak  household  consumption  and 
depressed investment. Import growth in the second 
half of the year is forecast to be subdued in the EU 
and  to  remain  flat  in  the  euro  area.  For  the  year 
2012 as a whole, this translates into an unchanged 
import  volume  in  the  EU  and  an  annual  growth 
rate of -½% in the euro area. With a strengthening 
of  the  domestic  economy,  import  volumes  are  set 
to  grow  gradually  over  the  forecast  horizon, 
averaging 2½% in 2013 in the EU and about 2% in 
the  euro  area.  In  2014,  import  growth  is  expected 
accelerate  to  5%  in  both  areas.  But  despite  the 
in  domestic  demand, 
expected  strengthening 
to  fall  short  of 
growth  rates  are  predicted 
expansion  rates  witnessed  in  the  pre-crisis  boom 
period.  This  is  particularly  true  for  programme 
countries  and  other  vulnerable  euro-area  Member 
States. 

Current–account  surpluses  in  the  EU  and  the 
euro area gradually expanding … 

Already  close  to  balance  in  2011  despite  the 
negative  impact  of  increasing  import  prices,  the 
current account of the euro area is set to register an 
expanding  surplus  over  the  forecast  horizon.  The 
(in 
euro-area  balance 
adjusted terms) is expected to improve gradually to 
a surplus of 1¼% of GDP in 2014, while the EU is 
likely to register a mildly negative balance over the 
forecast  horizon.  The  EU  current-account  balance 
(in  adjusted  terms)  is  to  turn  slightly  positive  in 
2013 helped by a larger services surplus of around 

in  merchandise 

trade 

(15)  See  Chen,  R.,  G.-M.  Milesi-Ferretti  and  T.  Tressel, 
External imbalances in the euro area, IMF Working Paper
12/236, September 2012. 

22 

…  reflecting  the  ongoing  adjustment  at  the 
Member State level. 

The on aggregate positive current-account balance 
for the euro area and the EU as a whole still masks 
substantial  cross-country  differences  with  some 
Member  States  registering  substantial  surpluses, 
while  others  are  still  recording  considerable 
deficits  vis-à-vis  the  rest  of  the  world.  However, 
external  adjustment  is  ongoing,  especially  in  the 
euro  area  where  the  current-account  balances  in 
deficit countries are  improving relatively  fast (see 
Graph I.19).  At  the  outset,  these  improvements 
were mainly driven by lower import growth due to 
cyclically  weak  domestic  demand.  But  external 
adjustment is increasingly determined by structural 
shifts within vulnerable deficit countries. 

Gains  in  competitiveness,  reflected  by  lower  real 
effective  exchange  rates  and  declines  in  relative 
unit  labour  costs,  which  are  expected  to  decrease 
further over the forecast horizon, are an indication 
that  the  necessary  shift  in  relative  prices  in 
vulnerable  countries  is  underway  and  that  part  of 
the  adjustment  will  be  sustained  when  the  overall 
economic situation improves and domestic demand 
recovers. In particular, structurally lower growth in 
consumption  in  vulnerable  countries  is  likely  to 
prevent  import  growth  from  reaching  pre-crisis 
levels irrespective of the next cyclical upturn. 

Graph I.19:Current-account balances,  
euro area and Member States

% of GDP

pps. of GDP

9

6

3

0

-3

-6

-9

10

5

0

-5

-10

-15

U
L

I

L F
N

E
B

E
D

T
A

R
F

T
I

I

E S

I

Y
C

T
M

S
E

K
S

T
P

E
E

L
E

Current-account balance, average 1999-2008 (lhs)
Current-account balance, 2011 (lhs)
Expected change, avg. 2012-2014 versus 2011 (rhs)

Part  of  the  ongoing  adjustment  can  also  be 
attributed  to  shifts  in  investor  sentiment.  Private 
capital  inflows  to  vulnerable  countries  first  dried 
up and then moved into reverse ("sudden stop") as 
the  euro  area 
the  sovereign-debt  crisis 

in 

Economic developments at the aggregated level 

Table I.6:

Labour market outlook - euro area and EU

 (Annual percentage change)

 Population of working age (15-64)

 Labour force
 Employment
 Employment (change in million)
 Unemployment (levels in in millions)
 Unemployment rate (% of labour force)
 Labour productivity, whole economy
 Employment rate (a)

Euro area
2011 2012 2013 2014

0.0

0.3

0.2

0.4

16.0

10.1

1.1

68.5

-0.2

0.6

-0.8

-1.0

18.0

11.3

0.3

68.2

-0.2

0.2

-0.5

-0.7

18.9

11.8

0.6

68.0

-0.2

0.2

0.4

0.6

18.7

11.7

1.0

68.3

Spring 2012
  forecast
2012 2013

0.0

0.4

-0.5

-0.7

17.3

11.0

0.1

63.9

0.0

0.1

0.0

0.1

17.4

11.0

1.0

63.9

EU

2011 2012 2013 2014

0.0

0.2

0.2

0.6

23.2

9.7

1.4

68.6

-0.1

0.6

-0.4

-0.7

25.3

10.5

0.3

68.4

-0.1

0.3

-0.2

-0.4

26.3

10.9

0.7

68.4

-0.1

0.3

0.6

1.2

25.9

10.7

1.1

68.8

Spring 2012
  forecast
2012 2013

0.0

0.4

-0.2

-0.5

24.7

10.3

0.4

64.2

0.0

0.2

0.2

0.5

24.7

10.3

1.2

64.3

  (a)  As a percentage of population of working age.  Definition according to the Labour Force Survey. Spring and autumn
         forecasts not directly comparable due to a change in methodology. See also note 6 in the Statistical Annex.

intensified.  However,  the  disruption  of  private 
capital flows in affected euro-area Member States
has  been  partly  compensated  for  by  other  flows 
such  as  liquidity  provisions  by  the  Eurosystem  or
funds from financial assistance programmes.

only  slightly  in  the  second  quarter  of  2012  and
remained  stable vis-à-vis the  first  three  months of 
the  year.  This  suggests that
the  labour  market
adjustment will  increasingly  occur  in  terms  of
headcount employment.

labour  market 

The 
deteriorated …

situation  has 

further

reflecting 

the  EU  have  worsened, 

In 2012, labour market conditions in the euro area
and 
the
deterioration  in  the  overall  economic  situation
since  the  fourth  quarter  of  2011  and  heightened 
uncertainty. (16) In the year up to August 2012, the 
unemployment  rate  in  the  euro-area  and  the  EU
increased  by  1½ pps.  and  1 pp.  to  11.4%  and 
10.5%  respectively  (see  Graph I.20)  while  the
number of unemployed is about 2.1 million higher
in  both  areas.  The  net  increase  is  largely  due  to
rising unemployment  in  a  few  euro-area  Member
States where the jobless rate increased sharply. 

Since  much  of  the  EU  labour  market  adjustment
during the recession in 2008-09 took place through
a reduction in hours worked per person employed
and  occurred  to  a  far  lesser  extent  through 
reducing  staff,  employment  growth  during  the
initial  recovery  has  been  rather  weak.  This  slow 
pickup in employment  was  interrupted  when the 
economy slowed in the second half of 2011. Even
though the development in hours worked has been 
initial
rather
employment  adjustment  occurred  at  least  to  some
extent  through  the  reduction  in  working  hours.
Compared to the same period of the previous year,
employment in the euro area  and the EU declined

throughout

volatile 

2011,

the 

0.8

0.6

0.4

0.2

0.0

-0.2

-0.4

-0.6

-0.8

Graph I.20:Employment growth and unemployment
rate, EU

% 

% of the labour force

forecast

03 04 05 06 07 08 09 10 11 12 13 14

Employment (q-o-q%, lhs), forecast (y-o-y%, lhs)

Unemployment rate (rhs), forecast

* forecast figures are annual data

11.5
11.0
10.5
10.0
9.5
9.0
8.5
8.0
7.5
7.0
6.5

… with employment developments shaped by
sectoral adjustments … 

Across sectors,  the  weakening  in  employment  in 
the  euro  area  has  largely  affected  manufacturing,
but  especially  sectors which  were  burdened  by
overcapacities  such  as  financial  services  and
construction.  In the  second  quarter  of  2012,
employment 
in the  above-mentioned  sectors 
dropped  at  annual  rates  of  1.0%,  1.2%  and 5.3%
respectively.  The  September  readings  of 
the
employment  component  of  the  euro-area  PMI 
point  to  a  further weakening  in  employment
prospects in manufacturing and services.

(16) When coupled with an output contraction high uncertainty
via  its adverse  impact  on  hiring  may  induce  higher
unemployment than generally suggested by Okun's law, see
European  Commission  (DG  ECFIN),  Labour  market
developments in Europe 2012, pp. 11-12. 

Large  parts  of  lay-offs  in  crisis-hit  EU  countries
are  linked  to  far-reaching  structural  adjustments
across  sectors. As  a  result  of  domestic  debt  and 
banking  crises, highly  leveraged  sectors  tend  to

23

European Economic Forecast, Autumn 2012 

experience  higher  employment  volatility  due  to 
liquidity  shocks. (17)  When  compared  with  global 
economic  downturns,  the  negative  employment 
impact  of  these  domestic  crises  tends  to  be 
substantially  larger,  especially  when  relatively 
closed economies are affected. (18)

… and high unemployment risking to become 
entrenched. 

and 

jobless 

involved 

inactivity 

increasing 

Between  2008  and  2011,  gross  flows  between 
employment,  unemployment  and 
in 
Member States with robust labour markets such as 
Germany and Austria resulted in a net inflow into 
employment.  By  contrast,  Member  States  with 
persistently  low  job  finding  rates,  particularly 
those 
in  a  far-reaching  adjustment 
process,  registered  intensified  job  destruction  in 
2011 which on balance induced a large outflow of 
rates. 
employment 
Moreover,  the  implied  higher  share  of  long-term 
unemployment 
youth 
unemployment  has  raised  concerns  that  cyclical 
increases  in  joblessness  might  eventually  reduce 
into 
employability 
structural 
turn 
unemployment.  According 
to  Commission 
estimates, 
the  non-accelerating  wage  rate  of 
unemployment  (NAWRU),  a  common  gauge  of 
structural  unemployment,  has  indeed  increased 
substantially  since  2008.  Thus,  in  the  absence  of 
successful  adjustment  and  labour  market  reforms 
the  implied  rising  labour-market  mismatch  might 
induce a structurally higher unemployment rate in 
the future. (19)

rapidly 

rising 

and 

and 

worsening,  already  observable  since  spring  2011, 
has been most pronounced in the industrial sector, 
where  expectations  have  steadily  deteriorated  in 
the  EU  since  April  and  in  the  euro  area  since 
January  2012 
(see  Graph I.21).  Companies' 
growing reluctance to  hire and the need to reduce 
staff  is  mirrored  by  consumers'  unemployment 
fears  which  have  increased  almost  in  parallel 
during  the  summer  with  the  sharpest  increase 
registered in  August 2012. Although they are  still 
substantially below the peaks of spring 2009, they 
are  also  markedly  above  long-term  averages. 
Accounting  for  the  usually  lagged  response  of 
employment  to  changes  in  economic  activity  the 
decline  of  GDP  in  the  first  half  of  2012  and  the 
deteriorated  outlook  are  likely  to  worsen  labour 
market prospects in the near future. 

Graph I.21:Employment expectations, 
DG ECFIN surveys, euro area

level

level

-10

0

10

20

30

40

50

60

70

30

20

10

0

-10

-20

-30

-40

-50

07

08

09

10

11

12

Employment exp. in industry, next 3 months (lhs)

Employment exp. in services, next 3 months (lhs)

Consumers' unempl. exp., next 12 months (inverted, rhs)

A bleak short-term labour market outlook … 

…  with  employment  likely  to  be  less  resilient 
than in the past … 

Looking  ahead,  the  worsening  of  the  economic 
outlook  does  not  bode  well  for  EU  labour  market 
prospects. The latest readings of leading indicators 
suggest  a  further  weakening  of  the  labour  market 
situation 
to 
Commission  surveys,  employment  expectations  in 
the EU and the euro area fell below their long-term 
steady 
in  September  2012.  This 
averages 

future.  According 

the  near 

in 

(17)  See  Boeri,  T.,  P.  Garibaldi  and  E.  R.  Moen,  The  labor 
market  consequences  of  adverse  financial  shocks,  IZA 
Discussion Paper No. 6826, August 2012. 

(18)  See  Gamberoni, E., E. v. Uexkull and S. Weber, The role 
of openness and labour market institutions for employment 
dynamics  during  economic  crisis,  Employment  Working 
Paper No. 68, International Labour Office, Geneva 2010. 
(19)  See  European  Commission  (DG  ECFIN),  Labour  market 
developments in Europe 2012, pp. 24-25. According to the 
OECD,  the  estimated  increases  in  a  number  of  Member 
States  still  tend to  be  small  when  compared to  the  overall 
increase  of 
see,  OECD 
Employment Outlook, 2012, p. 33. 

the  unemployment 

rate, 

24 

Given  that  hours  worked  have  not  yet  recovered 
from  the  contraction  in  2008-09,  the  detrimental 
impact  of  the  current  slowdown  on  headcount 
employment  in  EU  is  expected  to  be  more 
pronounced  than  in  the  recent  past  (see  Box I.4). 
The lack of fiscal space and the ongoing structural 
adjustment in some Member States limit the scope 
for  supportive  policy  measures,  most  notably 
short-time working schemes, that protected the EU 
labour  market  partly  from  the  impact  of  the 
previous  downturn.  A  modest 
in 
economic  activity  over  the  forecast  horizon  may 
help  to  stabilise  the  labour  market  situation  at  the 
end  of  2013  and  give  rise  to  feeble  employment 
growth  in  2014  amongst  reduced  uncertainty  and 
recovery,  while 
firming 
evidence 
unemployment rates are likely to remain high over 
the forecast horizon. 

recovery 

of 

a 

Economic developments at the aggregated level 

…  and  cross-country  disparities  are  expected 
to prevail. 

in 
The  spread  between  unemployment  rates 
countries with a robust labour market situation and 
those  in  countries  facing  the  highest  jobless  rates 
has steadily increased since 2007. This divergence 
is  partly  due  to  different  institutional  settings  in 
national  labour  markets  which  determine  the 
country-specific  absorption  capacity  vis-à-vis 
symmetric  and  asymmetric  shocks. (20)  The  large 
growth  differential  is  likely  to  entail  a  further 
widening  of  the  already  diverse  labour  market 
conditions  across  EU  Member  States  in  2013  and 
which are projected to converge only slightly at the 
end of the forecast horizon. 

The  varying  labour  market  performance  across 
Member States is also reflected in diverging wage 
register 
developments.  Some  Member  States 
significant wage increases which imply a relatively 
strong rise in unit labour costs, at least in 2012. By 
contrast,  wage  growth  in  Member  States  faced 
with substantial internal and external adjustment is 
expected  to  be  very  moderate  or  even  negative, 
thus  allowing  for  a  gradual  improvement  in 
competitiveness and employment over the forecast 
horizon. 

Labour  market  adjustment  in  vulnerable  Member 
States is underway and adopted reforms are likely 
to  reduce  adjustment  costs.  But  this  will  be  a 
prolonged  process  and  visible  improvements  are 
not  to  be  expected  before  2014,  as  the  necessary 
reallocation  of  resources  from  the  non-tradable  to 
the tradable sector is also hampered by particularly 
investment  growth.  The  employment 
weak 
situation  in  less  vulnerable  economies  which 
proved rather benign during the 2008-09 recession 
as  companies  resorted  to  labour  hoarding  and 
adjusted working times accordingly is expected to 
be  comparatively  stable.  However,  with 
the 
exception  of  some  Member  States (21)  the  overall 
adjustment at the company level due to the current 
slowdown  may  occur  rather  through  reducing 
headcounts than through hours worked. 

(20)  On  the  role  of  labour  market  asymmetries  in  a  monetary 
union see Abbritti, M. and A. I. Mueller, Asymmetric labor 
market  institutions  in  the  EMU  and  the  volatility  of 
inflation  and  unemployment  differentials,  IZA  Discussion 
Paper No. 6488, April 2012. 

(21)  For  example,  in  Germany  working  time  accounts  are 
almost replenished as a result of solid economic growth in 
the past two years and further moves toward more flexible 
working-time  arrangements  have  extended  the  scope  for 
working-hour adjustments. 

Looking further ahead, employment is expected to 
increase  or  at  least  to  stabilise  by  2014  in  all 
Member  States  except  for  Cyprus  and  Slovenia. 
Unemployment  rates  are  forecast  to  fall  in  the 
large  majority  of  Member  States  with 
the 
exception  of  Belgium,  France,  Italy,  Cyprus, 
the  Netherlands,  Slovenia  and 
Luxembourg, 
Romania. 

Inflation has remained persistent 

In  the  course  of  2012,  consumer-price  inflation 
continued to be driven to a large extent by changes 
in  indirect  taxation  in  several  Member  States, 
volatile oil prices (in particular in euro terms) and 
rising food commodity prices. Although oil prices 
decreased significantly between spring and the end 
of  June,  they  have  almost  returned  to  their  April 
levels (both spot prices and futures). The net effect 
of the oil and food price increases combined  with 
higher indirect taxes (adding up to 0.4 pp. to HICP 
in  July-August),  as  well  as  lagged  effects  of  past 
oil-price  increases  from  the  first  quarter  of  2012, 
have  resulted  in  inflation  in  the  EU  and  the  euro 
area  that  has  been  proved  more  persistent  than 
expected in the spring forecast. Euro-area headline 
HICP inflation remained stable at 2.5% in the third 
quarter  of  2012  (see  Graph I.22),  while  EU 
headline inflation stood at 2.6%. 

Graph I.22:HICP, euro area

index, 2005=100

2.5

2.7

1.8

1.6

forecast

3.3

0.3

1.6

125

120

115

110

105

100

%

2.1

2.5
1.5
0.5
-0.5

07

08

09

10

11

12

13

14

HICP inflation (annual rate) (lhs)

HICP index (monthly) (rhs)

HICP index (annual) (rhs)

Figures above horizontal bars are annual inflation rates.

Core inflation (i.e. all items excluding energy and 
unprocessed  food)  in  the  EU  eased  from  2.3%  at 
the  end  of  2011  to  1.9%  in  the  third  quarter  of 
2012 (from 2.0% to 1.8% respectively in the euro 
area),  remaining  nevertheless  tenaciously  high 
given  the  amount  of  slack  in  the  economy.  The 
persistence in core inflation rates can be explained 
by  increases  in  indirect  taxation  rates  in  several 
Member  States  affecting  both  services  and  non-
energy industrial goods and the pass-through from 

25 

European Economic Forecast, Autumn 2012 

past 

the 
Graph I.23). 

exchange-rate 

depreciation 

(see 

Graph I.23:Inflation breakdown, EU

%

5

4

3

2

1

0

-1

07

08

09

10

11

12

13

14

Energy and unprocessed food

Other components (core inflation)

HICP, all items

With weak labour market conditions … 

Labour  conditions  have  worsened  in  the  first  half 
of  2012  and  have  thus  not  exerted  any  noticeable 
price pressures. Nevertheless, in the first quarter of 
2012,  the  growth  in  nominal  compensation  per 
employee  –  although  decelerating  –  continued  to 
significantly outpace productivity gains, prompting 
a  further  increase  in  nominal  unit  labour  costs. 
Hourly labour costs rose by an annual growth rate 
of  2.0%  in  the  euro  area  (2.3%  in  the  EU)  in  the 
second quarter of 2012, up from 1.6% (1.5% in the 
EU) in the first quarter of 2012. 

… producer-price inflation affected by volatile 
energy prices… 

Price  pressures  on  the  producer  side  have  been 
easing  since  the  spring  of  2011,  mainly  reflecting 
lower  energy  input  prices.  Industrial  producer 
prices  (excluding  construction)  fell  below  2%  in 
the EU and the euro area in mid-2012 and the most 
substantial  decrease  in  the  first  half  of  this  year 
was  observed  for  intermediate  goods,  i.e.  at  the 
earlier  stages  of  the  production  chain.  Similarly, 
producer  price  inflation  also  fell  noticeably  for 
consumer  goods  in  the  same  period.  However, 
annual  producer  price  inflation  increased  to  2.7% 
in both areas in August 2012 on the back of higher 
energy  prices,  suggesting  temporarily  somewhat 
higher inflation pressures from the producer side. 

… and well-anchored expectations …  

The survey indicators of price developments (both 
PMI  and  ESI  components),  which  signal  future 
producer-price  developments,  edged  up  slightly 

26 

over  the  summer  but  remained  still  at  rather 
moderate  levels  implying  that  the  scope  for  any 
substantial  output  price  increases  is  limited  in  the 
coming months (see Graph I.24). 

forecast 

Graph I.24:Producer Price Inflation and survey 
inflation expectations, EU

balance

balance

15

80

60

40

20

0

-20

07

08

09

10

11

12

PMI manufacturing output prices (lhs)

PMI manufacturing input prices (lhs)

PPI industry excl. construction (rhs)

10

5

0

-5

-10

inflation  expectations  have  been 
Consumers' 
volatile  since  the  beginning  of  2012,  reflecting 
inter  alia  the  volatility  in  commodity  markets. 
They  increased  again  slightly  in  August  and 
remained  at  an  elevated  level  as  they  tend  to  be 
highly  correlated  with  the  observed  (currently 
rates.  By  contrast, 
relatively  high) 
market-based 
the 
medium- to long term point to a substantial easing 
of  inflation  going  forward,  with  inflation  rates 
significantly  below 
the  ECB's  official  target. 
However,  in  times  of  continued  financial-market 
turbulences, these indicators  should be interpreted 
with caution. 

inflation  expectations 

inflation 

for 

…  the  outlook  is  for  a  gradual  easing  of 
inflation. 

In  2012,  HICP  inflation  is  expected  to  average 
2.7%  in  the  EU  and  2.5%  in  the  euro  area  on  the 
back  of  higher  energy  prices  and  increases  in 
indirect  taxes  in  some  Member  States.  Given  the 
current assumptions for commodity prices and the 
lagged  effects  of 
the  most  recent  oil  price 
increases, consumer-price inflation in the euro area 
and  the  EU  is  predicted  to  fall  below  2%  in  the 
second and third quarters of 2013 respectively. 

in 

labour  costs 

With  rises 
limited  by  high 
unemployment  and  producers'  price-setting  power 
constrained  by  subdued  consumption  growth, 
domestic  price  pressures  are  likely  to  recede 

Economic developments at the aggregated level 

further.  Annual  average  HICP  inflation  in  2013,
also  supported  by  declining commodity  prices,  is
forecast to decline to 1.8% in the euro area and to
2.0%  in  the  EU.  Looking  further  ahead,  the
subdued  recovery forecast to  set  in  in  the  second
half of 2013 and to gain further traction in 2014 is
not  expected  to  raise  inflationary  pressures,  as
output gaps  are  expected  to  close  only slowly.
Inflation  rates  across  Member  States  are  likely  to 
converge  as  the  impact  from  increases  in  indirect 
taxes  and  administrative  prices  fades.  Overall,
HICP  inflation  in  2014  is  predicted  to  average 
1.6% in the euro area and 1.8% in the EU. 

It  is  important  to note  that  the  HICP  inflation
forecast  for  2013  and  for  2014  in  particular,  is
subject  to  the  no-policy-change  assumption  that
excludes  fiscal  measures  that  are  not  known  or
sufficiently specified at the cut-off date but which
might be adopted afterwards and have a temporary
impact on headline figures.

finances  set
Public 
worsening outlook … 

to 

improve  despite  a

Fiscal  consolidation  is  expected  to  continue  over 
the  forecast  horizon, yet  at  a  somewhat  slower
pace  than  in  2011  in the  face  of weaker-than-
expected  growth.  Compared  to  the  2012  spring
forecast,  the  budgetary  projections for  2012  and 
2013  remain  largely  unchanged  at  the  euro  area
and EU level. As a result of sizeable consolidation
plans  implemented  by  several  Member  States,  the
general government  deficit  in  2012  is  expected  to
decline  by  0.8 pp.  of  GDP  in  both  the  euro  area 
to  3.3%  and  3.6%  of  GDP
and 
respectively.

the  EU, 

… but weaker growth likely to slow down pace
of reduction of headline deficits… 

to 

recover
With  economic  activity forecast 
gradually in the course of 2013 and acknowledging 
the fact that not all Member States have presented
a  draft  budget for  2013  yet,  general government
deficits  are  projected  to  decrease  further  in  2013.
Notably, the deficit is expected to decline to 2.6%
of  GDP  in  the  euro  area,  while  reaching  3.2%  of 
GDP in the EU.

2

1

0

-1

-2

-3

-4

-5

-6

-7

Graph I.25:Budgetary developments,
euro area

% of GDP

pps. 

forecast

05

06

07

08

09

10

11

12

13

14

General government balance (lhs)

Changes in structural balance (rhs)

2

1

0

-1

-2

-3

-4

-5

-6

-7

In  line  with  the  projected  moderate  pick-up  in
economic  activity  and  respecting  the  no-policy-
change  assumption,  the  deficit  is  projected  for 
2014 to edge down by 0.1 pp. to 2.5% of GDP in
the euro area and by 0.3 pp. to 2.9% of GDP in the 
EU (see Graph I.25).

…  while  the  improvement  in  budget  balances
is mainly driven by higher revenues … 

The  projected  decline  in  the  general  government
deficit in 2012 is due to higher general government
revenues  as  a  percentage  of GDP.  As  a  result  of

Table I.7:

General government budgetary position - euro area and EU

 (% of GDP)

 Total receipts (1)

 Total expenditure (2)
 Actual balance (3) = (1)-(2)
 Interest expenditure (4)
 Primary balance (5) = (3)+(4)
 Cyclically-adjusted budget balance 
 Cyclically-adjusted primary balance 
 Structural budget balance 
 Change in structural budget balance
 Gross debt

Euro area
2011 2012 2013 2014

45.4

49.5

-4.1

3.0

-1.1

-3.4

-0.4

-3.5

1.0

46.2

49.5

-3.3

3.1

-0.2

-2.2

0.9

-2.2

1.2

46.8

49.4

-2.6

3.2

0.6

-1.3

1.9

-1.3

0.9

46.6

49.1

-2.5

3.3

0.8

-1.6

1.7

-1.5

-0.2

Spring 2012
  forecast
2012 2013

46.2

49.4

-3.2

3.2

0.0

-2.0

1.2

-2.1

1.3

46.1

49.0

-2.9

3.2

0.3

-1.8

1.4

-1.9

0.2

EU

2011 2012 2013 2014

44.7

49.1

-4.4

2.9

-1.5

-3.7

-0.8

-3.8

1.1

45.5

49.1

-3.6

3.0

-0.6

-2.5

0.5

-2.7

1.0

45.5

48.8

-3.2

3.1

-0.2

-1.9

1.1

-2.0

0.8

45.3

48.2

-2.9

3.1

0.2

-2.0

1.1

-2.0

0.0

Spring 2012
  forecast
2012 2013

45.2

48.9

-3.6

3.1

-0.5

-2.4

0.7

-2.7

1.0

45.2

48.4

-3.3

3.1

-0.2

-2.2

0.9

-2.2

0.5

88.1

92.9

94.5

94.3

91.8

92.6

83.0

86.8

88.5

88.6

86.2

87.2

The structural budget balance is the cyclically-adjusted budget balance net of one-off and other temporary measures
estimated by the European Commission.

27

European Economic Forecast, Autumn 2012

in  both  areas.  By  contrast, 

increases  in  tax  rates  and widening  tax  bases,  the
revenue-to-GDP ratio is forecast to average 46.2%
in the euro area and 45.5% in the EU, implying an
increase  of  around  0.8 pp.  compared  to  2011  in
both  areas.  In  2013,  the  revenue-to-GDP  ratio  is
projected to rise further in the euro area to around
46.8%,  while stabilising  in  the  EU  as  a  whole.  In 
2014,  the  revenue  ratio  is  forecast  to  decline 
marginally 
the 
expenditure-to-GDP ratio is expected to stabilise in
both the euro area and the EU in 2012, as slightly
higher  interest  payments  and  increased  social
transfers  in the  downturn  offset  the  impact  of 
discretionary 
cuts.  Government
spending  is  projected  to  start  to  decline  in  2013
and  this  decline  is  projected  to  accelerate  in  both
areas  in  2014,  also  on  account  of  the  gradual
strengthening 
the  economic  recovery  (see 
Graph I.26).

expenditure 

in 

Graph I.26:General government revenues and 
expenditure, EU

% of GDP

forecast

52

50

48

46

44

42

40

05

06

07

08

09

10

11

12

13

14

Total revenues

Total expenditure

As  for  EU  budgetary surveillance,  only six
Member  States (22)  are  currently  not  subject  to  the 
Excessive Deficit Procedure (EDP). Among the 21 
Members States  currently under  the  EDP,  the
procedure  is  held  in  abeyance  in most  cases with 
the  exception  of  Spain  and 
the  programme
countries Greece and Portugal. 

… and structural balances are strengthened … 

Underlying the projected path of deficit reduction,
the  structural  budget  balance  (the  headline  deficit
corrected  for  cyclical  factors  and  one-offs  and
other  temporary measures)  is  forecast  to  improve
in  2012  by  around  1 pp.  of  GDP  in  the  euro  area 
and  the  EU  respectively.  Based  on  draft  national
the 
budgets 

available, 

currently 

that 

are 

(22) Bulgaria,  Estonia,  Finland,  Germany,  Luxembourg,  and
Sweden. In  the  case  of  Bulgaria  and  Germany  the  EDP
procedure was abrogated in June 2012.

28

improvement  in structural  balances  is  expected  to 
continue in 2013, albeit at a decreasing pace. The 
slowing pace of consolidation in structural terms is
likely to translate into a somewhat reduced (short-
term) drag of fiscal policy on growth. On the other
hand  there  is  evidence  that  in  crisis  periods  fiscal
multipliers can be higher than in normal economic
conditions (see Box I.5). In view of the no-policy-
change  assumption,  the  structural  balance  is  not
expected  to  improve  further  in  the  EU  in  2014,
while  in the  euro  area  a  slight  deterioration  in
structural terms is predicted.

…  whereas  debt 
increase further. 

ratios  are  expected 

to 

Despite  the  expected  decline  in most  Member
States'  headline  deficits over  the  forecast  horizon,
government debt ratios in the euro area and in the
EU  for  the  years  2012  and  2013  are  projected  to
increase.  The  increase  in  euro-area  government
debt from 88.1% of GDP in 2011 to 92.8% in 2012 
is  due  to  a  large  snowball  effect  and  stock-flow
adjustment.  The  snowball  effect,  which  includes
the  impact  of  interest  expenditure,  real  GDP
growth  and  inflation  on  the  debt  ratio,  is  mostly
responsible for the projected further increase in the
debt  ratio  in  2013  to  94.5% of  GDP.  In  the  EU,
general government  gross  debt  is  expected  to 
increase, albeit at decreasing rate, over the forecast
period reaching its peak (88.6% of GDP) in 2014.

Table I.8:
Euro-area debt dynamics

average 
2004-08

2009

2010

2011

2012

2013

2014

Gross debt ratio1 (% of GDP)
Change in the ratio

69.1

0.2

80.0

85.6

88.1

92.9

94.5

9.8

5.6

2.5

4.9

1.6

Contributions to the change in the ratio:

   1. Primary balance
   2. “Snow-ball” effect2
            Of which:

            Interest expenditure

            Growth effect

            Inflation effect

   3. Stock-flow adjustment

-1.1

0.3

3.0

-1.4

-1.3

1.0

1  End of period.

3.5

5.3

2.9

3.2

-0.7

0.9

3.4

0.6

2.8

-1.6

-0.6

1.6

1.1

0.8

3.0

-1.2

-1.0

0.6

0.2

2.4

3.1

0.4

-1.2

2.3

-0.6

1.8

3.2

-0.1

-1.4

0.4

94.3

-0.2

-0.8

0.6

3.3

-1.3

-1.4

0.0

2

The "snow-ball effect" captures

interest expenditure on
accumulated debt, as well as the impact of real GDP growth and inflation on the
debt
includes
differences in cash and accrual accounting, accumulation of financial assets and
valuation and other residual effects.

ratio (through the denominator).

The stock-flow adjustment

the impact of

5. 

RISKS

Overall,  risks 
to  GDP  growth  appear  more 
balanced  than  at  the  time  of  the  spring forecast,
though  downside  risks  continue  to  dominate.
While some of the previously-identified risks have
materialised,  most  notably  the  worsening of the
sovereign-debt  crisis  before  the  summer,  policy

decisions  taken  over  recent  months  have  also
reduced tail risks.

Despite  the  recent  significant  easing  of  tensions,
financial markets  remain  vulnerable  and highly 
dependent on the implementation of agreed policy
measures.  Spreads in European sovereign markets
still  remain high,  and  the  inter-linkages  between
the sovereigns  and  the  banking  sector  continue  to
pose  a  risk  to financial  stability.  European  banks
to  a  further
are  also  considerably  exposed 
weakening of the economy as it would reduce their
earnings,  limit  their  debt-servicing  capacity  and 
translate into higher credit risk. 

Further downside risks are related to developments 
in main  partner  economies.  In  China  and  some
other  emerging market  economies,  unexpectedly
weak  data  on  economic  activity  indicate  that
persistently high  growth  rates  cannot  be  taken  for
granted.  The  political  impasse  in  the  US  over  the
"fiscal  cliff"  generates  uncertainty
globally
through  its  large  potential  impact  on  US  GDP
growth,  including  the  risk  of a  recession  in  2013.
Sharp movements in oil prices and weather-related
price  hikes  for  staple  foods,  meanwhile,  illustrate
that commodity markets remain highly volatile.

On the upside, a faster and stronger-than-expected
positive  impact  of  recently  announced  policy
measures  at  the  European  and  national  level
aiming  at  resolving  the  euro-area  sovereign-debt
crisis  could  induce  a  more  broadly-based  and
enduring  easing  of  sovereign  and  bank  funding 
stress.  As  a  result,  business  and  consumer 
confidence  should  be  restored  more  quickly with
favourable effects on economic activity. A similar
virtuous  chain  reaction  could  be  initiated,  if 
structural  reforms in vulnerable  Member  States
were  to  bear  fruit  earlier  and  rebalancing within
the  euro  area  were  to  proceed  faster  and  more 
substantially than  expected.  Further  upside  risks
relate  to  policy  actions  in  the  US  and  some
emerging  market economies,  where  additional
monetary stimulus may support economic activity.

The materialisation of risks to the growth outlook,
whether  upside  or  downside,  is  likely  to  have  a
impact  across  Member  States.
differentiated 
Vulnerable  Member  States,  which would  suffer
most  from a deterioration of financing conditions,
would immediately be affected by a worsening or 
in the  sovereign-debt  crisis.  A  more
easing 
diversified  picture  could  also  result
from  the 
materialisation of risks to the external environment

Economic developments at the aggregated level 

in  combination with  Member  States'  different
geographical orientation of trade or the sensitivity
of  their  exports  to  exchange-rate  changes.  This
notwithstanding, no  Member  State would  be left
unscathed  by  the  realisation  of  downside  risks 
given 
among
the 
European economies. 

interconnectedness

strong 

The  substantial  uncertainty  surrounding the  GDP
growth outlook is reflected by a fan chart which is
derived  from  the  probabilities  associated with  the
different  upside  and  downside  scenarios  over  the
forecast horizon (see Graph I.27). As visualised by
the  shaded  areas  downward  risks  still  dominate,
but to a lesser extent than in the previous forecast
as downside tail risks have diminished. 

Graph I.27:Euro area GDP forecasts -
Uncertainty linked to the balance of risks

%

upper 90%

upper 70%

upper 40%

lower 40%

lower 70%

lower 90%

central scenario

actual

07

08

06

09

10

11

12

13

14

5

4

3

2

1

0

-1

-2

-3

-4

-5

in 

the  forecast  horizon.  On 

Risks  to  the  inflation  outlook  appear  broadly
the
balanced  over 
downside,  stronger  output  contractions  and  the
resulting  increasing  economic  slack might  reduce
price  pressures more  than  currently  expected.  A 
the  global  economy,
further weakening 
associated  with a  fall in commodity prices,  would
also decrease inflationary pressures. The risk of an
area-wide  deflation,  however,  appears  remote 
despite  the  possibility  that  some Member  States
could experience negative inflation rates for some
time.  On 
further 
increases
in  indirect  taxes  and  administrative
prices  linked  to  intensified  consolidation  efforts
and a faster and stronger-than-expected pick-up in
world  growth strengthening  global  demand  and 
pushing  up  commodity  prices,  might  additionally
fuel 
re-
intensifying geopolitical tensions that cause abrupt
supply  disruptions  and  a  surge  in  oil  prices  could 
jeopardise price stability in the short-term.

the  upside,  unanticipated 

pressures.  Moreover, 

inflationary 

29

European Economic Forecast, Autumn 2012

Box I.1: Ongoing adjustment in the euro-area periphery

The euro-area peripheral economies are undergoing
a  profound  process  of macroeconomic  adjustment
and  the  medium-term  growth  prospects  of  these
economies  crucially  depend  on  the pace  and 
smoothness  of  the  correction  of their  external  and 
internal imbalances. 

Vulnerable  economies 
periphery 

in 

the  euro-area

Even  if  they  share  some  common features,  the 
euro-area  peripheral  countries  differ  considerably
in  terms  of  their  respective  adjustment  needs.  On
the  one  hand,  Greece,  Spain,  Cyprus  and Portugal
used  to  register  very  large  current-account deficits
that  raised  doubts  on  their  sustainability.  On  the
other hand,  Ireland,  Italy  and  Slovenia  recorded
smaller  external  deficits,  but  their  governments, 
banks  and  firms  have  also  encountered  severe
funding  stress.  In  the  case  of Greece,  Ireland  and 
Portugal,  the  adjustment  process  is  supported
through  official financing  by  euro  area  Member
States  (as  bilateral  loan  commitments  and  loans
from the EFSF) and the IMF, while the EFSF/ESM
provides  funds  to  recapitalise  the  Spanish  banking
system.  Cyprus  has
requested  official
financing, but a specific adjustment programme has 
not  yet  been  agreed.  In  addition,  the  current-
account  adjustment  in  these  economies  has  also
been  cushioned  by 
the  ECB's  non-standard
monetary policy measures.

also 

and  surpluses  in  the  17  Member  States  that
currently constitute the euro area (around EUR 490
billion  in  absolute  value or  5½%  of  the  euro-area
GDP)  were more  than  three  times  larger  than  in
1999. Since then, a substantial adjustment has been
ongoing,  with  euro-area  economies with  initially
high  current-account  deficits  accounting  for  the
lion’s  share  of  the  current-account  correction.  In
2012 however, Greece, Spain and Portugal are still 
registering  high  deficits  (see  Graph 1)  and  the
adjustment  process  is  expected  to  continue  well
beyond the end of the forecast horizon in 2014.

Cyclical versus structural factors

Export  growth  has  proven  robust  in  spite  of weak
demand  in  the  EU  and  at  the  global  level.  This  is
particular  true  for  Ireland  as  an early  adjuster,  but
also  for  Spain, Portugal  and Slovenia. Due  to
competitiveness gains, export growth is expected to
remain  relatively strong  over  the  forecast  horizon 
and 
the  external
adjustment.  But  the  reduction in  current-account
deficits has also resulted from a marked decline in
imports  related  to  the compression  in domestic
demand,  in  particular  in  Greece  and  Cyprus  (see
Graph 2).

the  main  driver 

to  be 

in 

Graph 2:Changes in the composition of current-
account adjustment in the euro-area periphery

pps. of GDP

Graph 1:Reduction in the current-account
deficits in the euro-area periphery (2007-14)

% of GDP

30

26

22

18

14

10

6

2

-2

-6

-10

5

0

-5

-10

-15

-20

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

8
0
0
2

0
1
0
2

2
1
0
2

4
1
0
2

IE

EL

ES

IT

CY

PT

SI

The  convergence  of  interest  rates,  diverging  unit
labour  costs  and  globalisation-related  external
shocks  have  all  contributed  to  the  widening of
current-account deficits in the periphery and to that
of  surpluses  in  the  core  economies  prior  to  the
crisis.  In 2007,  the  overall  current-account  deficits

30

E
I

L
E

S
E

T
I

Y
C

I

T S
P

E
I

L
E

S
E

T
I

Y
C

I

T S
P

E
I

L
E

S
E

T
I

Y
C

I

T S
P

Exports

Imports

Income and transfers

2007-11

2011-14

This  cyclical component  implies  that  imports  and
deficits  could  widen  again  when  growth  resumes.
Thus,  for  the  current-account  adjustment  to  be
durable  it  is  crucial  that  reductions  in  deficits  are 
mainly driven by structural factors. Insofar as pre-
crisis growth in the euro-area periphery was partly
driven  by  excessive  credit  expansion  and  inflated 
linked  with  exaggerated 
consumption  growth 

(Continued on the next page)

Economic developments at the aggregated level 

Box (continued) 

income  expectations,  a  large  part  of  the  current
output  contractions  can be  attributed  to  structural
rather than cyclical elements. While this suggests a
durable correction of current-account imbalances, it 
also  necessitates  far-reaching  structural  reforms  in
losses  by  increasing
order  to  recapture  output
flexibility 
absorbing
and 
unemployed resources in productive uses. 

productivity 

and 

Pace of adjustment

The reduction in current-account deficits is not per
se  sufficient  to  lower  net  external  liabilities,
especially when  a  contracting  GDP  aggravates
external  debt  ratios.  To  assess  the  pace  of  the
adjustment, it is therefore necessary to consider not
only  the  reduction  in  current-account deficits,  but
also  developments  in  stock  variables,  like  external
debt  or  international  investment  positions.  Though
the  threshold  varies  from  country  to  another  and
over time, the available data suggest that the level
of net external liabilities of a number of vulnerable
economies  can  be  considered  as  unsustainable.(1)
This  is  particularly  the  case  for  Greece,  Ireland,
Spain,  Cyprus  and  Portugal,  while  Italy  and 
Slovenia are in a better position (see Graph 3).

Graph 3:Net external liabilities, 2006-14, euro-area periphery

% of GDP, inverted scale

-120

-100

-80

-60

-40

-20

0

20

40

7
0
0
2

0
1
0
2

3
1
0
2

7
0
0
2

0
1
0
2

3
1
0
2

7
0
0
2

0
1
0
2

3
1
0
2

7
0
0
2

0
1
0
2

3
1
0
2

7
0
0
2

0
1
0
2

3
1
0
2

7
0
0
2

0
1
0
2

3
1
0
2

7
0
0
2

0
1
0
2

3
1
0
2

IE

EL

ES

IT

CY

PT

SI

Note: For 2012-14, the net external liabilities were
extrapolated on the basis of the projections for current account 
and capital transfers. For Greece, the government debt
restructuring in Q1-2012 was also considered.

The  recent  decline  in net  external  liabilities  as  a
percentage  of GDP  in  Greece,  Cyprus,  Spain  and 
Portugal has  mainly  been  caused  by  valuation
effects  (and  the  government  debt  restructuring  in
the  case  of  Greece).  In  particular,  domestically-
issued  securities  held  by foreigners  lost  market
value,  including  corporate,  bank  and  sovereign
bonds.  The  observed  valuation  changes  are,  for  a

(1) See also D'Auria, F., J. in 't Veld and R. Künzel, The 
dynamics  of 
investment  positions,
Quarterly  Report  on  the  Euro Area,  10(3),  October 
2012, pp. 7-20.

international 

further 

the  onset  of 

the  absence  of 

large  part,  related  to  market  scepticism  on  the
sustainability  of  the  external  position  of  these
countries  and  the  solvency  of  the  issuing  entities.
Therefore the decrease in  net  external liabilities
the  crisis  may actually
since 
underestimate the aggravation in the external debt.
In 
liability-reducing
valuation changes – an improvement in confidence 
may  even  reverse  parts  of  the  latest  valuation
changes – the current-account deficits and the low
economic  activity  predicted  over  the forecast
horizon  suggests  that  the net  liabilities-to-GDP 
ratio  will  barely  stabilise  in  Spain  and  Portugal,
while  it  could  again  increase  in  Greece.  By
contrast, ratios in Ireland and Slovenia are expected
to  fall  quickly  thanks  to  the  projected  surpluses,
while  Italy's  net  external  debt  ratio  will  remain 
stable. However, provided that the fragmentation in
financial  markets  is  overcome,  the  financing  of
these liabilities will become easier. 

together  with 

The  large  negative  net  external  positions  of  these
economies 
their  unfavourable
financing  conditions  mean  that  the  net  outflow  of
primary  income  (mainly  interest  payments  and 
dividends)  is  set  to  increase  (see Table 1).  The
resulting widening in the difference between output
(GDP) and income (GNI) growth implies that in the
euro-area periphery (with the exception of Cyprus)
the  contraction  in  income  between  2007  and  2014
is deeper than the reduction in real GDP.

Table 1:
Net outflow (-) of primary income (% of GDP) and cumulated 
difference between GDP and GNI growth rates

2007

2011

2012

2013

2014

IE

EL

ES

IT

CY

PT

SI

-13.4

-19.3

-21.6

-22.2

-22.3

-2.9

-2.3

-0.1

-5.8

-3.2

-2.1

-2.9

-2.0

-0.8

-0.3

-3.7

-1.4

-2.3

-2.5

-0.7

-8.4

-4.1

-1.8

-2.7

-2.9

-0.7

-8.4

-4.6

-1.9

-3.3

-3.1

-0.7

-8.4

-5.0

-1.9

Difference in 
cumulated growth
rate GDP and GNI
(2007-14)
17.3

4.5

6.6

3.3

-2.2

4.4

6.1

Accordingly,  the  expected  subdued  recovery may 
not be reflected by higher incomes. This will weigh
on domestic demand and stresses the critical role of
net  exports  for  growth  prospects  in  vulnerable
economies.

Internal adjustment

The  external  accounts  are  the  mirror  of  the
domestic  equilibriums  and 
imbalances. The
increase  in  net  exports  – necessary  to  generate  a 
sufficiently  large external  surplus  in  goods  and 
services to offset the net outflow of primary income

(Continued on the next page)

31

European Economic Forecast, Autumn 2012 

Box (continued) 

and bring the current account to sustainable levels – 
requires  a  reduction  in  production  costs  vis-à-vis 
main 
in 
through 
productivity and reduction in nominal labour costs. 

competitors 

increase 

an 

economy  as  a  whole,  and  moved  resources  away 
from  the  export-oriented  industries,  the  larger 
reductions  in  nominal  remunerations  have  taken 
place  in  the  non-tradable  sector  including  the 
public sector (see Chart 6).(2)

Graph 4:Unit labour costs, selected euro-area 
Member States

Graph 6:Nominal compensation per employee, 
selected euro-area Member States

6

5

4

3

2

1

0

-1

-2

y-o-y%

forecast

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Surplus countries (BE, DE, LU, NL, AT, FI)

Vulnerable economies (IE, EL, ES, IT, CY, PT, SI)

in 

the  growth  rate 

Since 2010, the growth rate of nominal unit labour 
costs  (ULC)  in  the  euro-area  periphery  has  been 
below 
the  core  surplus 
economies. For 2012, the difference is of more than 
3 pps.  (see  Graph 4).  When  the  years  2010-14  are 
considered, 
the 
economies  with  higher  adjustment  needs  given 
their initial external imbalances and unemployment 
rates (see Graph 5). 

the  adjustment 

larger 

in 

is 

Graph 5:Changes in ULC and unemployment

BE

EE

FR

FI

MT

SI

IT

CY

SK

PT

IE

ES

EL

LU

DE

AT

NL

15

10

5

0

-5

4
1
-
0
1
0
2

,
y
m
o
n
o
c
e

l
a
t
o
t

,

C
L
U
n
i
e
g
n
a
h
C

-10

-15

-20

0

5

15
10
Unemployment rate, 2012

20

25

30

The  reduction  in  ULC  in  vulnerable  countries 
relative to the core euro area stems from increases 
in productivity,  labour  shedding,  which  offsets  the 
labour  hoarding  of  recent  years,  as  well  as 
reductions  in  the  nominal  remuneration  in  several 
sectors. Moreover, while excessive wage growth in 
the  crisis  put 
the  non-tradable  sector  before 
pressure  on  the  level  of  remuneration  for  the 

32 

y-o-y%

6

5

4

3

2

1

0

-1

01

02

03

04

05

06

07

08

09

10

11

Tradables (surplus countries: BE, DE, LU, NL, AT, FI)
Tradables (vulnerable economies: IE, EL, ES, IT, CY, SI)
Non-tradables (vulnerable  economies: IE, EL, ES, IT, CY, SI)

Non-tradable sectors: Construction, public administration, and 
market services other than trade, transport and communication. 

Shifting resources to export-oriented industries 

For  the  structure  of  production  in  the  peripheral 
economies  to  change  and  a  recovery  of  their 
competitiveness  to  materialise,  there  is  a  need  not 
only to change relative prices among countries but 
also across sectors within countries. 

As  a  general  benchmark,  the  prices  of  tradables 
should fall so that exporting companies are able to 
increase their sales abroad and gain market shares. 
The  extent  of  the  decline  in  export  prices  depends 
on the relative specialisation of each country and its 
size  in  each  market.  In  so  far  as  the  euro-area 
peripheral  economies  are  price  takers  in  most 
markets, the necessary fall in export prices vis-à-vis 
competitors  may  be  relatively  small  for  a  certain 
gain in market shares. In these cases, the reduction 
in  labour  costs  leads  to  an  increase  in  the  trade 
margins  of  exporters,  thus  pulling  resources  from 
the  non-tradable  sector.  However  for  this  shift  to 
occur  the  relative  prices  in  non-tradable  branches 
within  each  country  should  also  fall  and  the 
margins in the tradable branches increase. 

(2)  For  a  more  detailed  discussion  of  labour  cost 
developments  in  the  euro  area  periphery  and  core 
countries  since  2010,  see  Buti,  M.  and  A.  Turrini, 
Slow but steady? Achievements and shortcomings of 
competitive disinflation within the euro area, ECFIN 
Economic Brief, forthcoming. 

(Continued on the next page) 

 
 
 
 
 
 
Box (continued) 

The available evidence so far is not yet conclusive, 
also  due  to  the  difficult  financing  conditions  that 
many firms in the peripheral countries are currently 
facing.  However,  the  pre-crisis  trend  of  strong 
increases in the prices of non-tradables has clearly 
been  discontinued  and  relative  price  of  non-
tradables started to fall in 2009 (see Graph 7). This 
decrease  is  expected  to  continue  over  the  forecast 
horizon.  The  pace  of  the  correction  in  relative 
prices within each economy depends greatly on the 
degree of competition in each domestic market, and 
the absence of barriers to the entry and exit of firms 
in each sector.  

In  the  current  context  of  still  elevated  funding 
stress  in  periphery  countries  the  shift  of  resources 
from the non-tradable to the tradable sector may be 
for 
constrained  as 

investment  necessary 

the 

Economic developments at the aggregated level 

restructuring is impeded by the limited availability 
of  loans  and  tight  credit  conditions.  (see  also 
Box I.2). 

Graph 7:Price in tradable and non-tradable 
branches, selected euro-area Member States

y-o-y%

6

5

4

3

2

1

0

-1

-2

99

00

01

02

03

04

05

06

07

08

09

10

11

Tradables (surplus countries: BE, DE, LU, NL, AT, FI)
Tradables (vulnerable economies: IE, EL, ES, IT, CY, PT, SI)
Non-tradables (vulnerable economies: EL, ES, IT, CY, PT, SI)

33 

European Economic Forecast, Autumn 2012

Box I.2: Assessing the impact of diverging financing conditions within the euro area

the  economic 

literature  points 

to  an
While 
important role of integrated financial markets in the
smoothing  of  income  shocks  and  the  sharing of
risks  in  a  monetary  union,  the  emergence  of
sovereign risks in the euro area has undone part of
the  integration  accomplished  over  the  last years.
Retrenching  cross-border  interbank  capital flows,
rising  home  bias  in  sovereign-bond  holdings,  as
well  as  growing  divergence  of funding  costs  for
that
sovereigns
financial  conditions  within  the  euro  area  have
become  more  fragmented  in  2012.  Fragmentation 
has led to divergent bank-lending rates and lending
volumes across euro-area Member States.

and  banks  provide  evidence 

The  strong  interdependence  between  banks  and
their  domestic  sovereigns  in  euro-area  countries  is
at the heart of the propagation of the sovereign-debt
crisis  to  private-sector financing  conditions.  There
is  clear  evidence  of  a  parallel  evolution  of
sovereign-  and  bank-credit  default  swaps  in  most
euro-area  countries.(1) Since  sovereign  ratings  and
bond  yields  act  as  benchmarks for  banks'  ratings
and  medium  to  long-term  funding  costs  on  capital
markets,  the  divergence  in  sovereign-risk  premia
has  translated  into  differences  in  banks'  financing 
costs.  This  bank-sovereign 
is 
interdependence 
particularly visible in the case of Italy and Spain.

Graph 1:Sovereign and bank CDSs - Italy
5-year CDS premia

bps

700

600

500

400

300

200

100

0

08

09

10

11

12

Banks

Sovereign

factors 

to
Other 
fragmentation.  For  example,  banks  in  countries
with  high debt  are  considered  riskier  because  of

contributed 

have 

also 

(1) See Merler, S. and J. Pisani-Ferry, "Hazardous tango:
sovereign-bank 
financial
interdependence 
stability  in  the  euro  area", Banque  de  France,
Financial  Stability  Review,  April  2012,  No.  16,  pp.
201-210.

and 

34

their home bias in bond holdings, i.e., they hold an 
over-proportional large share of domestic sovereign 
debt,  which  has  lost  in  value as  the  sovereign's
yields increased. In case of a bank becoming ailing,
a  highly-indebted  sovereign  may  not  be  able  to
offer financial support, which makes the funding of
banks  in  vulnerable  Member  States  a  more  risky 
investment. 

Graph 2:Sovereign and bank CDSs - Spain
5-year CDS premia

bps

700

600

500

400

300

200

100

0

08

09

10

11

12

Banks

Sovereign

real-estate  segment.  Bank 

Moreover,  banks  in  some  euro-area  countries  are
highly  exposed  to  an  over-indebted  private  sector, 
increasing the risk of further losses, particularly in 
the 
financing  via 
deposits has  also been  impaired  due  to  significant
deposit  outflows  from  some  vulnerable  Member
States.  In  response  to  more  difficult  funding
conditions,  banks 
in  a  number  of  euro-area 
countries started to offer relatively high retail rates
to  attract  depositors  (see  Graph  3).  In 
the
meantime,  banks  in  core  euro-area  countries  were
able  to  reduce  deposit  rates,  making  use  of  the
historically  low-interest-rate  environment  created
by  the  ECB's  accommodative  monetary  policy
stance and safe-haven capital flows.

Dysfunctional  wholesale  and  interbank markets  in 
the euro area and significant deposit outflows have
made  banks  in  a  number  of  euro-area  countries
highly dependent on Eurosystem funding. Although
the ECB's non-standard measures, inter alia the two
three-year  LTROs  settled  by  the  Eurosystem  in 
December 2011 and March 2012, have contributed
to  mitigate
and
the  euro  area, 
deleveraging  pressures  within 
lending  conditions  for  private  households  and

fragmentation 

financial 

(Continued on the next page)

Economic developments at the aggregated level 

Box (continued) 

corporations have  remained  heterogeneous  across
Member States.(2)

Graph 4:Interest rates on loans to enterprises
(new businesses, maturity up to 1 year)

Graph 3:Interest rates on deposits
(outstanding amounts - up to one year maturity)

%

6

5

4

3

2

1

0

03

04

05

06

07

08

09

10

11

12

DE

FR

IT

ES

EL

PT

their 

Interest  rates  on  bank  loans  to  enterprises  show
divergence,  with 
timing  very much
corresponding to the outbreak of the sovereign-debt
crisis  in  different  countries.  Greek  and  Portuguese
rates  started  to diverge  in  2010 while  Spanish  and
Italian  rates  started  to  differentiate  from German
and  French  rates  only  in  late  2011  and  in  2012.
Lending  volumes  have followed  similar  patterns,
declining  in  the  most fragile  euro-area  countries
while remaining slightly positive in the core. 

The heterogeneity of lending conditions is expected
to have implications for growth divergence because
the  banking  system  acts  as main  intermediary  in 
allocating  external  funds  from  and  to  the  non-
financial  corporate  and 
the household  sector.
Capital-market-based financing  is  less  developed
than  for  example  in  the  USA, meaning  that  most
corporates  have  little  alternative  to  using  bank
loans  as  external  funds.  Small  and  medium-sized
enterprises  are  particularly  strongly  dependent  on
loans.  The  strong
banks'  ability 
for  private-  and 
correlation  between
sovereign  debt  observed 
in  many  euro-area
countries suggests that the sovereign-debt crisis has
also  impacted  on market-based  financing  of  the
non-financial sector in the euro-area countries most
affected by the sovereign-debt crisis.

to  provide 
yields 

the banking  sector  and 

(2) For  an  empirical  analysis  of  the  link  between  the
lending
sovereign  and 
conditions,  see Albertazzi,  U.,  Ropele,  T.,  Sene,  G.
and  F.  M.  Signoretti,  The  impact  of  the  sovereign
debt  crisis  on  the  activity  of Italian  banks,  Banca
d’Italia Occasional Paper no. 133, September 2012.

7.5

%

6.5

5.5

4.5

3.5

2.5

1.5

03

04

05

06

07

08

09

10

11

12

DE

FR

IT

ES

EL

PT

Whether banks' supply of credit is the main reason
of  the  observed  divergence  in  credit  growth  is
difficult to assess. A recent analysis of demand and 
supply factors  in  credit  developments  points  to  a
rather equal importance of both in the euro area.(3)
Most  recent  data  from  the  ECB's  Bank  Lending
Survey  indicates  that  banks  predict  demand  for
credit  to  remain  very  low,  with  the  country
breakdown in line with the observed developments
in  actual  lending  volumes. Low demand  for  credit 
is  usually  coincides  with  a  negative  assessment  of
general economic prospects and less so with banks'
curtailing the supply of loans. 

Graph 5:Loans to enterprices
(index of national stocks y-o-y growth rate)

%

35

30

25

20

15

10

5

0

-5

-10

-15

04

05

06

07

08

09

10

11

12

DE

FR

IT

ES

EL

PT

Another complication arises from the asymmetry of
business  and  credit  cycles.  While  economic 
downturns  are  immediately  accompanied  by  sharp 

(3) See  Del Giovane,  P.,  Eramo,  G.  and  A.  Nobili,
in  credit
"Disentangling  demand  and 
developments:  A  survey-based  analysis  for Italy",
Journal  of  Banking  &  Finance,  October  2011,  Vol.
35, Issue 10, pp. 2719-2732.

supply 

(Continued on the next page)

35

Graph 6:EC Quest model scenarios EA GDP 
(N - negative, P - positive)

%

1.5

1.0

0.5

0.0

-0.5

-1.0

-1.5

-2.0

-2.5

12

13

14

Periphery (N)

Periphery (P)

Core (N)

Core (P)

Euro area (N)

Euro area (P)

Note: % difference from central scenario

Overall,  the  fragmentation  in  financing  conditions
is  certainly  responsible  for  part  of  the  increased
economic  disparities  within  the  euro  area.  In 
response,  the  ECB has  since  the  beginning  of  the
sovereign-debt  crisis  taken  non-standard  measures
to  cope  with  the dysfunctional  transmission  of  its
monetary  policy  to  the  wider  euro-area  economy.
The recently announced plans for a banking union
aim at  breaking  the  link  between  sovereign  debt
and  the  banking  system,  thereby mitigating  the
forces  behind  the  fragmentation  of  the  euro-area 
financial system.  Although alleviating funding and
liquidity  tensions  in  the  banking  systems,  these 
measures will not reduce some other important risk
factors  related 
the
possibility of further losses due to exposures to the
private  sector,  and  macro-economic  risk  will 
remain in place.

to  banks'  asset  side, 

i.e. 

European Economic Forecast, Autumn 2012

Box (continued) 

declines in credit growth, credit recoveries usually 
lag economic upturns.(4)

The main  downside  and  upside  risks for  the
economic  forecast  relate  to  developments  in  the
illustrated  by
sovereign-debt  crisis  and  are 
scenarios  using  the  Commission  QUEST  model.
The  largest  downside  risk  relates  to  a further 
escalation in the sovereign-debt crisis which would
amplify 
risk  premia  and  worsen  consumer
confidence.  In  this  scenario  it is  assumed  that  a 
further  increase  in  sovereign-risk  spreads  by  300 
bps in the most vulnerable countries would lead to
a further divergence in lending conditions between
the  core  and  the  periphery  (Greece,  Italy,  Spain,
Portugal,  Ireland).  Corporate  risk  premia  in  the 
euro-area periphery are assumed to increase by 200
bps while consumer credit is further curtailed. Core
euro-area countries would also be affected through 
lower  confidence.  In  this  negative  scenario,  GDP
growth in the periphery would be 2 pps. lower than 
in  the  forecast  baseline  and  0.4 pp.  lower  in    the
core.  An  upside  scenario  assumes  a 
faster
resolution of the sovereign-debt crisis and a gradual 
elimination of the divergence in lending conditions
between  core  and periphery.  In  this  scenario, the
sovereign  spreads  in  the  periphery  are  assumed  to
fall  by  200  bps  lower  leading  to  a  125  bps  fall  in 
private-sector  risk  premia.  The  faster  resolution of
the sovereign-debt crisis would also have a positive
confidence  spillover  on  core  countries.  The
resulting GDP growth  would be 1.1 pps. higher in
the periphery and 0.2 pp. higher in core countries.

(4) See Bijsterbosch, M. and T. Dahlhaus, Determinants
of  credit-less  recoveries,  ECB  Working  Paper  series
no. 1358, June 2011.

36

Economic developments at the aggregated level 

Box I.3: The role of expectations and confidence indicators in short-term forecasting

Confidence  –  or  the  lack  of  it  –  is  generally 
considered  as  a  determining  factor  of  business 
cycle  fluctuations.  This  is  particularly  true  at  the 
current  juncture,  where  a  rebound  in  sentiment  in 
financial  markets  and  amongst  households  and 
enterprises  is  seen  as  a  pre-requisite  for  the 
economic  recovery.  However,  confidence  is  often 
considered  an  elusive  concept  in  the  economic 
debate  partly  because  it  is  difficult  to  measure 
there  are  very 
empirically  and  also  because 
different views on the factors underpinning it. This 
box  reviews  briefly  the  channels  of  transmission 
from  confidence  to  the  real  economy  and  it 
evaluates  to  what  extent  the  future  course  of  the 
economy is captured by commonly used confidence 
indicators. 

How  do  shifts  in  confidence  impact  on  the 
economy? 

that 

There  are 
two  main  alternative  views  on 
confidence.  The  first  one,  relying  on  standard 
economic theory, considers confidence as (rational) 
expectations about future development of economic 
variables, for example growth or employment. The 
literature  points  to  unemployment  duration,  the 
return on stock prices and monetary variables such 
as  the  short-term  interest  rate  as  determinants  of 
consumer  confidence  and  suggests 
the 
parameters  affecting  consumer  confidence  are 
strongly changing over time.(1) (2) For the euro area, 
there is some evidence that business and consumer 
confidence  reacts  to  changes  in  the  euro-dollar 
exchange rate, with respondents mainly reacting to 
"bad"  news.(3)  These  changes 
in  expectations 
impact  on  the  real  economy  via  changes  in  the 
expected present value of investment projects or in 
income  expectations  which  will  in  turn  induce 
revisions to companies' investment and households' 
consumption  plans.  The  second  view  associates 
confidence  with  a  behaviour  that  is  not  subject  to 
rational  decision-making  but  closely  linked  to  the 

(1)  For the US see Benjanuvatra, S., The determinants of 
consumer  confidence  and  consumer  expenditure, 
University of York, mimeo, available at: http://www-
users.york.ac.uk/~sb652/dccce.pdf. 

(2)  Beltran Lopez, H. and A. Durré, The determinants of 
consumer  confidence:  the  case  of  the  United  States 
and Belgium, CORE Discussion Papers No. 2003/53, 
Université  catholique  de  Louvain,  Center 
for 
Operations Research and Econometrics (CORE), July 
2003. 

(3)  European  Commission,  The  joint  harmonised  EU 
programme  of  business  and  consumer  surveys, 
Special Report No. 5, 2006. 

idea  of  "animal  spirits".(4)  According  to  that 
concept, 
recurring  waves  of  optimism  and 
pessimism  move  the  economy  in  an  accordingly 
favourable or adverse equilibrium. There is indeed 
some  evidence  in  favour  of  this  view with  respect 
to the 1990-91 recession in the US.(5)

the 

sharply 

to  an  abrupt  drop 

decisions, 
lead 

Regardless  of  the  abovementioned  schools  of 
thought,  sentiment  about  the  future  is  surrounded 
by uncertainty in terms of the dispersion of possible 
irreversibility  of  many 
outcomes.  Given 
heightened 
investment 
uncertainty  may 
in 
investment  expenditures.  In  such  an  environment, 
the risk of misinvestment and the implied expected 
losses  appear  high,  while  it  seems  less  costly  to 
postpone  of 
investment  decision. 
Similarly,  heightened  uncertainty  about  the  future 
path  of  the  economy  and,  thus,  income  prospects 
may  cause  households  to  delay  consumption  and 
increase 
their  (desired)  precautionary  savings. 
Actual saving rates might not reflect this when falls 
in real income oblige them to draw on their savings 
to support consumption levels. 

forego  an 

In the current context, the changing prospects for a 
resolution  of  the  sovereign-debt  crisis  in  the  euro 
area  are  reflected  in  both  volatile  risk  premia  in 
financial  markets  and  muted  confidence  amongst 
households and companies. Further policy progress 
towards  a  resolution  would  thus  be  expected  to 
stabilise  and  improve  sentiment  all-around  and 
underpin domestic demand. 

Interpreting confidence indicators 

concept  of 

Whether  a  survey  indicator  is  in  line  with  the 
theoretical 
expectation  depends 
essentially  on  its  construction,  especially  in  terms 
of  the  questions  underpinning  it.  In  the  survey 
underlying 
Purchasing 
the  Manufacturing 
Managers'  Index  (PMI)  respondents  are  asked  to 
compare  the  current  level  of  certain  firm-specific 
variables (e.g. new orders) with their level a month 
ago. While respondents' expectations regarding the 

(4)  This  notion  was  originally  coined  by  J.  M.  Keynes 
theory  of 
see  Keynes,  J.  M.,  The  general 
employment, 
and  money,  London: 
interest, 
Macmillan,  1936,  pp. 161-62.  For  a  contemporary 
interpretation  see  Akerlof  G.  A.  and  R.  J.  Shiller, 
Animal  Spirits.  How  human  psychology  drives  the 
economy  and  why  it  matters  for  global  capitalism. 
Princeton: Princeton University Press, 2009.  

(5)  See Blanchard, O., Consumption and the recession of 
1990-91, American Economic Review, Vol. 83, No. 2, 
pp. 270-74, May 1993. 

(Continued on the next page) 

37 

European Economic Forecast, Autumn 2012

Box (continued) 

situation. 

future  do  not  feature  in  this  survey,  the  leading
properties  of  the  PMI  may  partly  reflect  the fact
that  increases  in  the  economic  variables  under
investigation translate into economic growth with a
time-lag (e.g. new orders). By contrast, the German 
Ifo  Business  Climate  Index  is  the  outcome  of
questions  concerning  firms'  current  and  expected
business 
Insee's  Business  Climate
Indicator  as  well  as  DG  ECFIN's  Economic 
Sentiment  Indicator  (ESI)  summarise  the  answers
to questions about respondents' expectations for the
next 
the  current  situation  and
developments  over  the  past  three  months.(6) (7)  By
incorporating  assessments  about 
the
current  and  the  expected  situation  in  the  future,
confidence 
to strike  a  balance 
try 
between reliability and forward-looking properties.

three  months, 

indicators 

the  past, 

The  ESI  combines  the  balance  scores  (percentage
of  positive  answers  minus  percentage  of  negative
answers) of 15 questions addressing five economic
sectors (industry, services, construction, retail trade
and  consumers),  so  as  to  make  the  indicator
resistant  to  asymmetric,  sector-specific  shocks.
Forward-looking  questions  are  the  largest  group,
accounting  for  eight  balance  series,  while  the 
number of questions referring to the present and the
past  is  at  four  and  three  respectively.  In  line  with 
expectations,  the  forward-looking  questions  are
particularly strong in predicting economic activity:
five  out  of  eight  display  their  highest  correlation
with year-on-year  GDP  growth,  when  the  latter  is 
shifted  one  month  ahead.(8)  The  same  is  true  for 
only one question on the status quo and for none of
the  backward-looking  questions.  The  average
correlation of  the  forward-looking  business  survey
questions  with  one-month  ahead  GDP  growth  is 
just as high as for the backward-looking questions
in a coincident setting.

(6) The ESI also includes the assessments of consumers,

where the time horizon is 12 months. 

(7) For  the  US,  the  Conference  Board's  Consumer
Confidence Index  and  the  University of  Michigan's
Consumer  Sentiment  Index  are  constructed  in  a
similar  fashion,  incorporating  questions  both  about 
past and future developments.

(8) To get a granular view of temporal relations between 
monthly indicators and quarterly GDP the latter was
transformed 
linear
interpolation.

frequency  by 

to  monthly

Its  strong  correlation  with  GDP  together  with  its 
timely availability makes  the  ESI  a  very  useful 
early indicator.(9) At the same time, the fact that its 
leading properties are evident only in the very short
term  suggests 
the  genuine  expectations
that 
component is limited. 

130

120

110

100

90

80

70

60

50

Graph 1:GDP growth, Economic Sentiment Indicator 
(ESI) and Production Expectations Industry, euro area
levels
y-o-y%

96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12

GDP (rhs)

ESI

Production expectations industry (rescaled to have mean of
100 and std. deviation of 10 [in line with the ESI])

6

4

2

0

-2

-4

-6

Evidence  on 
confidence indicators

the  explanatory  powers  of

Despite  their  good  tracking  record,  confidence 
indicators  have  been  criticized  based  on 
the
argument  that  they  simply  summarise  information
contained  in  other  variables.  A  recent  study  using
the  Commission's consumer  survey finds  that
consumer confidence has an explanatory effect for 
private consumption growth, even when the typical
explanatory  variables  such  as  income, wealth  or
interest  rates  are  controlled  for.(10)  Regarding  their
forecasting performance, there is evidence that the 
predictive  ability  of  confidence  indicators  varies
but  tends  to  be  higher before  turning points of  the
business  cycle  and  especially when  confidence
plummets and falls below a certain threshold.(11)

(9) The coincident correlation of the composite ESI with

GDP growth is 0.92 over 1996-2012.

(10) Dées, S. and P. Soares Brinca, Consumer confidence
as a predictor of consumption spending: Evidence for
the  United  States  and  the  euro  area, ECB  Working
Paper, No. 1349, June 2011. 

(11) Bruno,  G.,  Consumer  confidence  and  consumption
forecast:  A  non-parametric approach, MRPA  Paper, 
No. 41312, September 2012.

38

Economic developments at the aggregated level 

Box I.4: Euro-area labour markets: less resilience and more divergence ahead?

resilient, 
relatively 

At  the  onset  of  the  crisis,  labour  markets  in  most 
and
euro-area 
remained 
countries 
aggregate  unemployment  was 
little
affected  by  the fall  in  output during  the 2008-09
recession,  notably  in  comparison  with  the  US.
Labour  hoarding  was  partly  linked  to  a  prompt 
adjustment  in  working  hours  (see  Graph 1).(1)  The
output  recovery  in  2010  was not  job-rich,  and
employment  started  falling  again  in  the  course  of
2011,  somewhat  earlier  than  GDP,  which declined 
in 
that  year.  Euro-area 
unemployment has been rising almost continuously
since  2009  and  is  currently  at  its  highest  levels 
since the introduction of the euro, forecast to reach
11.9% in 2013.  

last  quarter  of 

the 

What  factors  are  behind  the apparent  loss  of
resilience  of  the  euro-area  labour  markets  during
the  current  slowdown?  Is  this  a  problem common 
to  the  euro  area  or  is  it  specific to  some  countries
only? What are the near-term prospects?

Graph 1:Cumulative changes in GDP, number of 
workers and hours per worker, euro area

102

index, 2008Q1 =100 

100

98

96

94

08Q1

09Q1

10Q1

11Q1

12Q1

GDP

Hours per worker

Workers

A first  key  reason  for  the  reduced  employment
resilience is that the room for adjusting the average
hours  worked  by  employees  rather  than headcount
employment  has  become  considerably  smaller  in 
most  Member  States:  since  2010, hours  worked
have  somehow  recovered from  the  trough  reached 
in  2009,  but  they  have  stabilised  at  a level  below
the  one prevailing  before  the  crisis.  A  second
reason  is  that  the  heightened  uncertainty  on  the
evolution of the euro area crisis and in particular on 
the  prospects  for  a  sustainable  output  recovery
limits the scope for labour hoarding on the part of
employers.  Conversely,  during 
the  2008-09 
recession there was a widespread concern to avoid 
excessive job shedding in light of a likely rebound 

(1) See  European  Commission,  European  Economic
Forecast – Autumn 2010, European Economy, 2010, 
No. 7.

of economic activity, and this justified both labour
hoarding  decisions  by  firms  and  the decision  to
finance 
by
governments. Third, as compared with the onset of
the  crisis,  the  financial  buffers  necessary  to  hoard
labour may have narrowed.  

short-time

schemes 

working 

Graph 2:Contribution to the growth rate  of  euro-
area unemployment between 2008 and 2011

pps

21

18

15

12

9

6

3

0

-3

-6

ES FR EL IT PT IE NL SK EE SI FI CY AT BE MT LU DE

These  considerations,  which  hold  on  aggregate,
need also to take into account that since the start of
the  crisis  differences  across  euro-area 
labour
markets  have  widened  considerably  since  the  start
of  the  crisis.  Since  2008,  a  major  dispersion  of
unemployment  rates  is  observed,  and  a  substantial
fraction  of 
total  euro-area
increase 
unemployment is being driven by developments in 
a  few  countries,  notably  Spain  (see Graph 2).(2)
Employment  has  been declining  especially  in 
countries where indebtedness grew faster before the
crisis,  and  where  consequently 
the  need  of
deleveraging and adjusting fiscal positions became
stronger.(3)

the 

in 

Most  interestingly,  these  divergent  employment 
developments  are  linked  not  only  to  different 
growth  developments  across  countries,  but  also  to
to  output.  In
different  employment  responses 
particular, the unemployment response to output in
2011  exhibits  a  large  variation  across  euro-area 
countries,  with  much  stronger 
in 
unemployment  for  a  given  variation  in  growth  in 
the countries most concerned by the debt crisis (see

increases 

(2)

In the second quarter of 2007 unemployment rates in
euro-area Member States ranged from about 3.6% in 
the Netherlands to a 11.3 in Slovakia, with a standard
deviation  of  2.2.  In  the  second  quarter  of  2012,
unemployment  rates were  between  4.3%  in  Austria
and 24.7% in Spain, with a standard deviation of 6.1. 
(3) See  European  Commission,  Labour  market
developments  in  Europe,  European  Economy,  2012,
No.5. 

(Continued on the next page)

39

Moreover,  evidence  suggests  that  the  matching  in
the  labour  market  is  worsening.  The  Beveridge
curve  for  the  euro  area  has  been  shifting  outward
since 2011 (see  Graph 5), indicating that more job 
vacancies  coexist with  a  higher  unemployment 
level. This worsened job matching process is likely
to be driven by differences in the skill composition
of  labour  demand  and  supply  stemming from  an
ongoing  restructuring  of  the economy, which 
entails  a  permanent  reallocation  of  labour  across
different  sectors  of  economic activity.  Together
with  limited  geographical  mobility,  it  implies
reduced 
job  finding  rates  and  unemployment 
becoming more entrenched. All in all, this evidence
suggests  that  risks  of  hysteresis  effects  could 
materialise,  with 
becoming
persistent even once the economy starts to recover.

unemployment 

Graph 5:Beveridge curve  95Q1 - 12Q2, euro area

12

10

8

s
e
i
c
n
a
6
c
a
V

4

2

0

01Q1

08Q1

07Q1

02Q1

00Q1

12Q1 

11Q1 

99Q1

98Q1

06Q1

03Q1

04Q1
05Q1

0

7.0

7.5

8.0

8.5

9.0

10.0
Unemployment rate

9.5

95Q1
96Q1

97Q1

10Q1 

%

10.5

11.0

11.5

the 

rates, 

light  of 

aggregate 

large  dispersion

of
the 
In 
unemployment 
employment 
developments  at  the  euro-area  level  will  crucially
depend  on developments  in  countries  that  record
the  highest  unemployment  levels,  especially with 
regard to wages. Since 2011 real wages have been
growing less than productivity in  most, but not all
high-unemployment  countries, contributing  to  a
downward  adjustment  in  real unit  labour  costs.
Looking  forward,  wage moderation  in  the  private
sector  in  countries  such  as  Italy,  Spain,  Portugal
and  Greece could  be  linked,  inter-alia,  to  recently
adopted  reforms  in  the wage  setting  system, with 
expected  positive  effects  in  terms  of  job  creation
and unemployment reduction.

European Economic Forecast, Autumn 2012

Box (continued) 

Graph 3).  This  seems  to  confirm  that  the  loss  in
resilience  of  the  labour  market during  the  current
slowdown  is  linked  to heightened  uncertainty  on
the economic outlook and reduced financial buffers
to  hoard  labour,  in  particular  in  sectors  facing  a
structural decline,  factors  that were  present  to  a
very  different  extent  across  the  countries  of  the
euro area.

Graph 3:Changes in the unemployment rate 2008-11:
actual and Okun's Law predictions

pps.

7
6
5
4
3
2
1
0
-1
-2
-3

EE DE BE FI MT SK FR LU AT IE NL IT SI ES PT CY EL

Predicted

Actual

Note: Predicted values are out-of-sample forecasts based on an
Okun-law estimation for the period 1997q1-2008q1.

As far  as  near-term  prospects  for  labour  markets 
are  concerned,  these  will  depend  not  only  on  the
growth outlook, but also on the extent to which the
recovery of output translates into job creation.

80

70

60

50

40

30

20

10

0

-10

Graph 4:Proportion of long-term unemployed over 
total unemployment

%

FI AT CY LU NL FR ES BE DE PT SK MT EE IT EL IE SI

change 09Q2 - 12Q2

09Q2

In  this  respect,  a  number  of  elements  do not  bode
well.  The  duration  of  unemployment  has  been
rising  in  most  Member  States,  with  the  biggest
increases  recorded  in  Ireland,  Slovenia,  Spain  and 
Estonia  (see  Graph 4).  Increases  in  unemployment
duration 
lower
employability  of  job  seekers  (skill  losses,  stigma
effects)  and  to  an  increased  risk  of  job  seekers
dropping out of the labour force.

associated  with 

are  often 

40

Economic developments at the aggregated level 

Box I.5: Forecast errors and multiplier uncertainty

The  current  forecast  of  a  0.4%  fall  in  euro-area 
GDP in 2012 is substantially lower than what  was 
expected  even  1½  years  ago:  our  spring  2011 
forecast  projected  a  rate  of  growth  of  1.8%  for 
2012. Such over-prediction of  euro-area  growth  in 
recent years has been common to most forecasters, 
including other major international institutions. An 
analysis  presented 
latest  IMF  World 
Economic  Outlook  argues  that  past  forecast  errors 
provide evidence that forecasters have significantly 
underestimated fiscal policy multipliers.(1)

the 

in 

Without  questioning  that  fiscal  multipliers  are 
probably  larger  than  usual  at  the  current  juncture, 
this  box  assesses  some  of  the  evidence  regarding 
forecast errors, focusing only on the euro area, and 
argues  that  much  caution is  warranted  when  using 
past forecast errors as indirect evidence for the true 
size of the fiscal consolidation multiplier. There are 
two  reasons  for  that:  first,  the  forecast  errors  over 
the  2010-11  period  have  been  predominantly 
underestimations  of  higher-than-expected  growth 
in  2010,  which  were  in  fact  associated  with 
stimulus  measures  in  that  year;  second,  when 
controlling  for  increases  in  sovereign-bond  yields 
the correlation between forecast errors and changes 
in the fiscal stance breaks down.  

Fiscal  multipliers  in  structural  macroeconomic 
models 

the 

The  general  conclusion  from  macroeconomic 
models is that there is no single multiplier. The size 
of  the  multiplier,  defined  as  the  change  in  GDP 
following  a  1%  of  GDP  change  in  fiscal  deficits, 
depends  on 
fiscal 
the  composition  of 
consolidation (or expansion), its persistence and the 
accompanying  monetary  and  financial  conditions. 
This  finding  is  common  to  the  models  used  by 
international  organisations  (see  the  comparison  in 
Coenen  et  al.  (2012)).(2)  The  fiscal  multiplier 
differs across countries and over time. It is found to 
be  larger  (i)  for  direct  government  spending  and 
targeted  transfers  (as  opposed  to  tax  cuts  and 
general  transfers);  (ii)  if  the  share  of  liquidity-
constrained  (or  'rule  of  thumb')  and/or  credit-

(1) 

IMF,  World  Economic  Outlook,  October  2012,  box 
1.1:  Are  we  underestimating  short-term 
fiscal 
multipliers?, pp. 41-43. 

(2)  Coenen,  G.,  C.  Erceg,  C.  Freedman,  D.  Furceri,  M. 
Kumhof,  R.  Lalonde,  D.  Laxton,  J.  Linde,  A. 
Mourougane, D. Muir, S. Mursula, C. de Resende, J. 
Roberts, W. Roeger, S. Snudden. M. Trabandt, J. in ’t 
Veld,  Effects  of  fiscal  stimulus in  structural  models, 
American  Economic  Journal:  Macroeconomics, 
Vol. 4, No. 1, January 2012, pp. 22-68. 

constrained  consumers  is  larger;  (iii)  if  nominal 
interest  rates  are  invariant,  either  because  they  are 
at  their  zero  lower  bound,  or  in  general  for  small 
economies  within  a  monetary  union;  (iv) 
if 
economies  are  less  open  (unless  the  fiscal  shocks 
are synchronised across trading partners); (v) if the 
shock is temporary rather than permanent.  

In the Commission's QUEST model, multipliers for 
temporary  fiscal  shocks  are  typically  between 
0.1-0.4 for tax changes, but in the range of 0.7-1.5 
for  spending  changes  when  credit  constraints  are 
high  and  interest  rates  are  at  the  zero-lower 
bound.(3)  However, it is generally accepted that the 
impact  multiplier  associated  with  permanent  fiscal 
consolidations  is  substantially  smaller  than  the 
multiplier of temporary fiscal contractions, because 
of  more  positive  crowding  in  (confidence)  effects 
of  private  consumption  and  investment  associated 
with  an  expected  increase  in  net  income.(4)  In 
QUEST 
permanent 
consolidation  for  the  EU  aggregate  in  normal 
circumstances  lies,  depending  on  the  instrument, 
between 0.2-0.8, and is on average for a balanced-
composition  consolidation  around  0.4.  However, 
when interest rates are constrained by the zero rate 
floor,  and  in  an  environment  of  global  fiscal 
retrenchment,  as  in  the  current  environment,  the 
average multiplier can rise to 0.5-0.7. 

the  multiplier 

for 

a 

Analysis  of 
between stimulus and consolidation multipliers 

forecast  errors:  distinguishing 

the 

have 

underestimated 

that 
Do  recent  forecast  errors  really  suggest 
forecasters 
fiscal 
multiplier?  To  answer  this  question  we  conduct  a 
similar  exercise  as  the  IMF,  and  regress  the 
forecast  errors  for  GDP  growth  on  the  forecast  of 
the  change  in  the  fiscal  stance.  Under  rational 
expectations, this coefficient should be zero.(5) We 
confine our attention to the euro area. This has the 
limiting 
advantage  of  a 
ourselves  to  countries  in  a  monetary  union  we 

'cleaner'  sample:  by 

(3) 

In-depth  analysis  of  the  specific  impact  of  different 
revenue  and  expenditure  items  on  economic  activity 
can be found in the chapter I.2 "The impact of fiscal 
consolidation  on  Europe's  economic  outlook"  of 
European Commission, European Economic Forecast 
- Autumn 2010, European Economy 7/2010. 

(4)  This is a common finding in all structural models in 
the  comparison  exercise  reported  in  Coenen  et  al.
(2012), pp. 60-65. 

(5)  The  IMF  authors  find 

this  coefficient 

to  be 
between  -0.4  and  -1.2  and,  assuming  a  multiplier  of 
0.5  was  used  in  the  forecast  process,  conclude  from 
this  that  the  actual  multiplier  lies  between  0.9  and 
1.7. 

(Continued on the next page) 

41 

European Economic Forecast, Autumn 2012

Box (continued) 

remove  one  source  for  cross-country multiplier
heterogeneity,  i.e.  differences  in the  exchange-rate 
regime. A second advantage is that we can interpret
the results better for individual countries.

It is useful to start with a closer look at the forecast
errors. Graph 1 takes the Commission's spring 2010
forecast and shows the GDP forecast errors for the 
years  2010  and  2011  for  the  euro-area  Member
States.  As  is clear  from  this  graph,  there  was  no
systematic  overestimation  of growth,  but  in  fact
forecast errors were predominantly positive, i.e. the
Commission  underestimated  growth,  in  particular
in 2010. For the euro-area aggregate, growth turned 
out  1.0  pp.  higher  than  was  forecast  in  2010,  and
only -0.1 lower in 2011. 

Graph 1:Forecast errors for GDP growth

pps.

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-1

-2

-3

-4

-5

-6

-7

BE DE EE IE EL ES FR IT CYLUMTNL AT PT SI SK FI EA

2010

2011

Note: GDP growth forecast errors for the spring 2010 forecast.

Graph  2.a  shows  the  spring  2010  forecast  of  the
changes in the fiscal stance (concretely, the change
in  the  structural  fiscal  balance  as  a  percentage  of
potential GDP) in both years and Graph 2.b depicts
the actual changes in the fiscal stance on the basis
of  the  current  autumn  2012  estimates.  Differences
between the actual changes and what was projected 
in the spring 2010 forecast are significant. Much of
the  consolidation  efforts,  in  particular  those  in
2011,  were  in fact  not  included in  the  forecast  in
spring 2010.(6)

Looking at the actual fiscal stance in Graph 2.b in
more  detail  shows  that  at  least  two  groups  of
countries can be distinguished:

(6) The  Commission's  forecast  uses  a  no-policy-change
assumption  in the  forecast  process  for  outer  years.
Only  those  policy  measures  that  have  been  publicly
announced, are fully credible and known in sufficient
detail are taken into account in the forecast. In times
of  consolidation  when  measures  have  not  been  fully
approved yet at the time of forecast publication, this
may lead to a positive bias in the growth forecast for
outer years.

(cid:16) Countries  which  have  undertaken  measures  to 
permanently reduce debt levels (increase in the
structural balance in both 2010 and 2011).

(cid:16) Countries  which  have  undertaken  temporary
fiscal  expansions,  especially  in  2010,  followed
by consolidation efforts in 2011 (e.g. Germany,
Austria, Finland, Luxembourg and Malta). 

As  discussed  below,  however, Greece  deserves  to
be treated apart from other Group 1 countries. 

Graph 2a:Forecast fiscal stance, spring 2010

pps.

BE DE EE IE EL ES FR IT CYLUMTNL AT PT SI SK FI EA

Graph 2b:Actual fiscal stance

pps.

7

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-2

-3

7

6

5

4

3

2

1

0

-1

-2

-3

BE DE EE IE EL ES FR IT CY LUMTNL AT PT SI SK FI EA

2010

2011

Note: change in the structural fiscal balance as a percentage of
potential GDP: spring 2010 forecast vs. autumn 2012 forecast.

Stimulus measures in the second group in 2010 are
associated with  large  positive  forecast  errors  for 
these countries. As the impact multiplier associated
with  temporary  fiscal  contractions/expansions  is
the multiplier  of
than 
substantially 
permanent
combining
countries in group 1 and 2 biases the estimate of the
permanent  consolidation  multiplier  in  an  upward 
direction.

consolidations, 

larger 

fiscal 

42

(Continued on the next page)

Economic developments at the aggregated level 

Box (continued) 

Graph 3a:Forecast fiscal stance and growth forecast 
errors

explored in the next section).(7)

6

4

2

0

-2

-4

-6

-8

-10

1.5

1.0

0.5

0.0

s
r
o
r
r
e

t
s
a
c
e
r
o
F

*
s
r
o
r
r
e

t
s
a
c
e
r
o
F

-0.5

-1.0

-1.5

-2.0

DE

FI

AT

CY

LU

MT

BE
FR
IT

NL

SK

ES

SI

IE

PT

y = -1.0711x + 0.1559

EL

-4.0

-2.0

0.0

2.0

4.0

6.0

Forecast fiscal stance

Graph 3b:Forecast fiscal stance and growth forecast 
errors: consolidations anly (Group 1)

SK

y = 0.0651x - 0.0978

ES

CY

BE

FR

IT

NL

SI

IE

PT

-2.0

-1.0

0.0

1.0

2.0

3.0

Forecast fiscal stance*

* Note: Vertical axis displays cumulative forecast errors for GDP 
growth in 2010-11 (spring 2010 forecast ); horizontal axis displays 
forecast of change in fiscal structural balance as perchentage of 
potential GDP in 2010-11 (spring 2010 forecast ).

The  largest  forecast  error  is  for  Greece,  which  is 
the  country  that  also  has  undertaken  the  largest 
consolidation  efforts.  However,  one  should  be 
careful  drawing  general  conclusions  from  the  case 
of  Greece  about  the  size  of  the  multiplier  for 
permanent consolidations. Just after the finalisation 
of  the  spring  2010  forecast,  Greece  entered  an 
EU/IMF  programme  while  at  the  same  time  the 
euro-area  sovereign-debt  crisis  started  to  escalate. 
Later  on,  serious  doubts  emerged  whether  the 
consolidation  measures  undertaken  would  be 
sufficient to permanently reduce sovereign debt, as 
manifest  in  rising  government-bond  yields  (to 
above  35%  at  the  end  of  2011).  A  sovereign-debt 
restructuring  eventually  took  place  in  February 
2012, resulting in private investor losses. Thus, the 
Greek case cannot be considered as a consolidation 
associated  with 
sector 
increasing 
confidence, a precondition for consolidations being 
less damaging to growth prospects in the short run 
is  further 
(the  role  of  sovereign-bond  yields 

private 

Graph  3  illustrates  the  change  of  the  relationship 
between  forecast errors  and the fiscal stance  when 
looking  at  the  consolidating  countries.  Panel  (a) 
displays  an  analysis  based  on  all  countries,  while 
panel  (b)  only  covers  the  consolidating  countries 
excluding Greece. The estimated coefficient for the 
whole  sample  is  -1.1  but  falls  to  zero  when 
considering  only  consolidating  countries.  The 
relationship  between  forecast  errors  and  expected 
changes in fiscal stance thus breaks down when the 
2010  stimulus  countries  and  Greece  are  excluded 
from  the  sample.  This  suggests  that  if  multipliers 
underestimation 
were 
concerned the multipliers of temporary expansions 
in 2010, not permanent consolidation in 2011.  

underestimated, 

the 

Graph 4:Forecast fiscal stance and growth forecast 
errors/revisions 2011-12

EE

PT

y = 0.3341x - 2.9229

DE

IE

MT
FR

AT

BE

FI

IT

LU

SI

CY

SK
NL

ES

*
s
r
o
r
r
e

t
s
a
c
e
r
o
F

3

2

1

0

-1

-2

-3

-4

-5

-6

-7

-2

0

2

4

6

8

Forecast fiscal stance*

* Note: Vertical axis: cumulative forecast errors for GDP growth in 
2011-12; horizontal axis: forecast for a change in fiscal structural 
balance as percentage of potential GDP in 2011-12; spring 2011 
forecast data.

When one shifts the analysis one year forward and 
considers  the  forecast  errors  made  in  spring  2011 
for 2011 and 2012 (current forecast), the sample no 
longer  includes  countries  undertaking  stimulus 
measures,  as  all  Member  States  have  been 
tightening  their  fiscal  stance.  Graph  4  shows  the 
results  for  this  analysis,  where  the  forecast  error 
(forecast revision in the case of 2012) for real GDP 
growth during 2011-12 is regressed on forecasts of 
fiscal  consolidation  for  the  same  period  that  were 
made  in  early  2011.  Although  errors  in  the  spring 
2011 forecast are much larger than in 2010, we find 
the coefficient on planned fiscal consolidation to be 
not   significantly   different  from  zero.(8)   This  is  

(7)  A  more  negative  growth  impact  relative  to  initial 
conditions  would  of  course  not  imply  that  growth 
would  have  been  higher  without  consolidations,  as 
the counterfactual would have been worse. 

(8)  Greece  is  excluded  from  this  sample  for  the  reasons 
described above. If Greece is included the coefficient 
increases  from  0.33  to  0.42, but in both  cases  is  not 
significant. 

(Continued on the next page) 

43 

 
 
 
European Economic Forecast, Autumn 2012

Box (continued) 

consistent  with  the  results  above  that  for  a  sample
of  only  consolidating  experiences  there  is  no 
evidence  of  a  systematic  underestimation  of  the
effects of fiscal consolidation.

Forecast-error decomposition

It  is  important  to  separate  the  effects  of fiscal 
consolidations  from  other  factors  related  to  the
sovereign-debt crisis. In principle, the forecast error 
for GDP growth can be written as a function of the
forecast error of all variables which have an impact
on  GDP  plus  differences  between  the  actual 
multipliers  of  the  explanatory  variables  and  the
values assumed in the forecast. Like the IMF, it is
assumed  here  that major  divergences  between
actual and assumed elasticities could only occur for 
the  multiplier  of fiscal  consolidation.  We  limit 
ourselves  to  only  two  observable  explanatory
fiscal
variables 
in 
consolidation  and  changes 
sovereign-risk
perception 
government-bond 
by 
yields).(9)

(expressed 

for  GDP

namely 

growth,

Table 1 shows estimation results for the unexpected 
output loss associated with a 1% of GDP expected
fiscal consolidation, for the full sample of euro-area
countries.(10)  While  in  the  estimation  without  any
control  variable  the  coefficient on  the  forecast  of
the fiscal stance is negative and highly significant, 
it  becomes  smaller  and  statistically  not  significant
when  sovereign  yields  are added  as  control
variable. The fact that the estimate for the forecast
of  the  fiscal  stance  is  smaller  when  the  change  in
sovereign  yields  is  included  suggests  that  the
Commission's  forecast  of  the  fiscal  stance  (in
spring 2010) and the subsequent change in the bond 
yields  are  correlated.  A  plausible  explanation,
indebted
which  applies  especially 
countries,  is  that  financial  markets  regarded  the
expected path of fiscal consolidation as insufficient
to guarantee government solvency and reacted with
a  more  adverse  risk  assessment.  In  this  case,  the 
negative coefficient for the fiscal stance in the first
regression  should  not  be 
interpreted  as  an
underestimation  of  the  fiscal multiplier  but  rather
as  capturing  a  negative  response  of  investors  to
possibly  insufficient  fiscal  effort  in  countries  with
severe debt problems.

to  highly 

(9) Sovereign-debt  problems  have  been  a  dominant
factor hampering growth in the euro area, but one can 
of course not exclude that results are also sensitive to
the omission of other explanatory variables.

(10) Due  to  lack  of  data  on  long-term  government-bond

yields Estonia is excluded from our sample. 

44

Table 1:

GDP forecast errors, fiscal stance and government bond yields

(1)

(2)

Constant

Forecast of fiscal stance

 0.16

-1.07 *** 

(0.52)

(0.28)

Change of sovereign bond yields

   -

 1.00 **

-0.20

-0.58 ***

(0.41)

(0.29)

(0.14)

R²

 0.49

 0.78

(cid:42)(cid:39)(cid:51)(cid:3)(cid:73)(cid:82)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87) (cid:72)(cid:85)(cid:85)(cid:82)(cid:85) (cid:32)(cid:3)(cid:450)(cid:3)(cid:14) (cid:451) (cid:73)(cid:82)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87) (cid:82)(cid:73)(cid:3)(cid:73)(cid:76)(cid:86)(cid:70)(cid:68)(cid:79) (cid:86)(cid:87)(cid:68)(cid:81)(cid:70)(cid:72) (cid:14) (cid:452) (cid:70)(cid:75)(cid:68)(cid:81)(cid:74)(cid:72)(cid:3)(cid:86)(cid:82)(cid:89)(cid:17)(cid:3)(cid:92)(cid:76)(cid:72)(cid:79)(cid:71)(cid:86)(cid:3)(cid:14)(cid:3)(cid:454)

Note: *, ** and  *** denote significance at the 10, 5 and 1% levels, resp. Forecast errors
are cumulative forecast errors for real GDP growth in 2010-11 (spring 2010 forecast);
forecast of fiscal change is the change in fiscal structural balance as percentage of
potential GDP in 2010-11 (spring 2010 forecast). Change in sovereign-bond yields is
the change in 10-year government bond yields, between end-2011 and end-2009.
Sample: euro-area countries (16 observations), excluding Estonia.
No strong conclusions should be drawn from these 
small  number  of
regressions  based  on  a 
the
observations,  except 
they  underline 
that
fiscal
importance  of  separating  the  effects  of
consolidations  from  other  factors  related  to  the
sovereign-debt  crisis.  Changes  in  sovereign-risk 
perceptions  are  equally  likely  to  be  important
factors  explaining past  forecast  errors  as  larger-
fiscal
multipliers 
than-expected 
consolidations.  

from

Concluding remarks  

indirect proof  for  a 

The  evidence  in  this  box  shows  that  the  link
between  past  forecast  errors  and  planned  fiscal
consolidations is not robust and should not be taken 
as 
larger  consolidation
multiplier. While it is generally accepted that fiscal 
multipliers for permanent consolidations are higher
now than they would be in 'normal' circumstances,
due  to higher  credit  constraints and  interest  rates
constrained 
floor,
separating the effects on economic activity of fiscal
consolidations  from  other  factors  related  to  the
sovereign-debt  crisis  is  important.  Taking  into 
account  the  temporary  nature  of  the  stimulus  in
countries  like Germany  and  excluding  the  special 
case  of Greece,  the  evidence  is consistent  with  an 
average multiplier smaller than one.

zero-interest-rate 

the 

at 

When  discussing  the negative short-term  output
costs  of  consolidation  it  is  important  not  to  lose
sight of what the counterfactual  would be. For the
most vulnerable  countries,  exposure  to  financial 
market pressures means there is no alternative than 
to  pursue  consolidation  measures.  The  alternative 
of  rising  risk  premia  and  higher  borrowing  costs
would  be  worse 
these  countries,  and
consolidations are needed to restore fiscal positions
and put debt projections back on a sustainable path.

for 

a 

general, 

case-by-case 

In 
to
consolidation  is  warranted,  whereby  the  speed  of
fiscal adjustment should be differentiated according
to country-specific fiscal and macro-financial risks.

approach 

Economic developments at the aggregated level 

Box I.6: Some technical elements behind the forecast

The  cut-off  date  for  taking  new  information  into 
account  in  this  European  Economic  Forecast  was 
19  October.  The  forecast  incorporates  validated 
public finance data as published in Eurostat's News 
Release 149/2012 of 22 October 2012. 

External assumptions 

This  forecast  is  based  on  a  set  of  external 
assumptions,  reflecting  market  expectations  at  the 
time  of  the  forecast.  To  shield  the  assumptions 
from  possible  volatility  during  any  given  trading 
day,  averages  from  a  10-day  reference  period 
(between  4  and  17  October)  were  used  for 
exchange and interest rates, and for oil prices.  

Exchange and interest rates 

The technical assumption as regards exchange rates 
was  standardised  using  fixed  nominal  exchange 
rates  for  all  currencies.  This  technical  assumption 
leads to implied average USD/EUR rates of 1.29 in 
in  2012  and  1.30  in  2013  and  2014.  The  average 
JPY/EUR  rates  are  101.7  in  2012,  and  101.9  in 
2013 and 2014. 

assumptions 

are  market-based. 
Interest-rate 
Short-term  interest  rates  for  the  euro  area  are 
derived  from  futures  contracts.  Long-term  interest 
rates  for  the  euro  area,  as  well  as  short-  and 
long-term interest rates for other Member States are 
implicit  forward  swap  rates, 
calculated  using 
corrected  for  the  current  spread  between  the 
interest  rate  and  swap  rate.  In  cases  where  no 
market  instrument  is  available,  the  fixed  spread 
vis-à-vis the euro-area interest rate is taken for both 
short-  and  long-term  rates.  As  a  result,  short-term 
interest rates are expected to be 0.6% on average in 
2012, 0.3%  in  2013  and 0.5%  in  2014  in  the  euro 
area.  Long-term  euro-area 
rates  are 
assumed  to  be  1.5%  on  average  in  2012,  1.7%  in 
2013 and 2.0% in 2014. 

interest 

Commodity prices 

Commodity  price  assumptions  are  also,  as  far  as 
possible, based on market conditions. According to 
futures markets, prices for Brent oil are projected to 
be  on 
in  2012, 
109.1 USD/bbl  in  2013  and  103.1  USD/bbl  in 
2014. This would correspond to an oil price of 87.5 
EUR/bbl  in  2012,  84.3 EUR/bbl  in  2013  and  79.6 
EUR/bbl in 2014. 

average  112.5  USD/bbl 

Budgetary data  

a 

to 

into  deficit-increasing 

Data  up  to  2011  are  based  on  data  notified  by 
Member  States  to  the  European  Commission  on 
1 October and validated by Eurostat on 22 October 
2012.  Eurostat  has  withdrawn 
specific 
reservation,  expressed  in  April  2012,  on  the  data 
reported  by  Ireland,  relating  to  the  fact  that 
restructuring  plans  of  Allied  Irish  Banks  and  Irish 
Life & Permanent (in 2012 renamed as Permanent 
TSB) were not yet finalised. The Central Statistics 
Office  of  Ireland  and  Eurostat  have  examined 
the  EU 
updated  restructuring  plans  sent 
Competition  authorities.  These  plans  form  a 
suitable  basis  for  partitioning 
the  July  2011 
injections  in  Allied  Irish  Banks  and  Permanent 
TSB 
and  non-deficit 
increasing components. This has been implemented 
in  revised  data  reported  by  Ireland.  Eurostat  has 
withdrawn  a  specific  reservation,  expressed  in 
April 2012, on the data reported by Ireland, relating 
to  the  statistical  classification  of  National  Asset 
Management Agency Investment Limited (NAMA-
IL).  On  the  basis  of  documents  provided  by  the 
Central  Statistics  Office  of  Ireland,  NAMA-IL  is 
majority  privately-owned,  following  the  sale  by 
Irish  Life  of  its  stake  in  NAMA-IL  to  a  private 
investor. This is a necessary condition for a special 
purpose  entity  to  be  classified  outside  the  General 
Government sector, pursuant to Eurostat’s decision 
of 15 July 2009 on public interventions during the 
financial crisis.  

Eurostat is no longer amending the deficit and debt 
data reported by the United Kingdom  with respect 
to public financial defeasance structures, as the UK 
Office  for  National  Statistics  has  reclassified 
Bradford  &  Bingley  and  Northern  Rock  Asset 
Management to the General Government sector, in 
line  with  the  financial  defeasance  chapter  of  the 
Manual on Government Deficit and Debt.  

For  the  forecast,  measures  in  support  of  financial 
stability  have  been  recorded  in  line  with  the 
Eurostat  Decision  of  15  July  2009.(1)  Unless 
reported otherwise by the Member State concerned, 
capital  injections  known  in  sufficient  detail  have 
been 
financial 
transactions,  i.e.  increasing  the  debt,  but  not  the 
deficit.  State  guarantees  on  bank  liabilities  and 
deposits 
as  government 
expenditure, unless there is evidence that they have 
been  called  on  at  the  time  the  forecast  was 

forecast  as 

are  not 

included 

included 

the 

in 

(1)  Eurostat News Release N° 103/2009. 

(Continued on the next page) 

45 

European Economic Forecast, Autumn 2012 

Box (continued) 

finalised.  Note,  however,  that  loans  granted  to 
banks  by  the  government,  or  by  other  entities 
classified  in  the  government  sector, usually  add  to 
government debt.  

For 2013, budgets adopted or presented to national 
parliaments  and  all  other  measures  known  in 
sufficient  detail  are  taken  into  consideration.  For 
2014, the 'no-policy-change' assumption used in the 
forecasts  implies  the  extrapolation  of  revenue  and 
expenditure  trends  and  the  inclusion  of  measures 
that are known in sufficient detail.  

The  general  government  balances  that  are  relevant 
for the Excessive Deficit Procedure may be slightly 
different  from  those  published  in  the  national 
accounts.  The  difference  concerns  settlements 
under swaps and forward rate agreements (FRA).  

According  to  ESA95  (amended  by  regulation  No. 
2558/2001),  swap-  and  FRA-related  flows  are 
financial  transactions  and  therefore  excluded  from 
the  calculation  of 
the  government  balance. 
However,  for  the  purposes  of  the  excessive  deficit 
procedure,  such  flows  are  recorded  as  net  interest 
expenditure.  European  aggregates  for  general 
government debt in the forecast  years 2012-14 are 
published  on  a  non-consolidated  basis  (i.e.  not 
corrected  for  intergovernmental  loans).  To  ensure 
consistency  in  the  time  series,  historical  data  are 
also  published  on  the  same  basis.  For  2011,  this 
implies a debt-to-GDP ratio in the euro area which 
is  0.7  pp.  (0.5  pp.  in  the  EU)  higher  than  the 
ratio 
consolidated  general  government  debt 
published by Eurostat in its news release 149/2012 
of 22 October 2012.  

General government debt projections for individual 
Member  States  in  2012-14  include  the  impact  of 
guarantees  to  the  EFSF,(2)  bilateral  loans  to  other 
Member States, and the participation in the capital 
of  the  ESM  as  planned  on  the  cut-off  date  of  the 
forecast (subject to approval).  

Calendar  effects  on  GDP  growth  and  output 
gaps 

The  number  of  working  days  may  differ  from  one 
year  to  another.  The  Commission's  annual  GDP 
forecasts  are  not  adjusted  for  the  number  of 
working days, but quarterly forecasts are. 

However, the working-day effect in the EU and the 
euro  area  is  estimated  to  be  limited  over  the 
forecast  horizon, 
that  adjusted  and 
implying 
unadjusted growth rates differ only  marginally (by 
up to ±0.1 pp.). The calculation of potential growth 
and  the  output  gap  does  not  adjust  for  working 
days. Since the working-day effect is considered as 
temporary,  it should  not  affect  the  cyclically-
adjusted balances. 

(2) 

In line with the Eurostat decision of 27 January 2011 
on  the  statistical  recording  of  operations  undertaken 
by the European Financial Stability Facility, available 
at: 
http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/
2-27012011-AP/EN/2-27012011-AP-EN.PDF

46 

PART II 
Prospects by individual economy 

Member States 

1.  BELGIUM 

Fiscal consolidation amid a subdued growth outlook 

The economy is at a standstill …  

Belgium's export-led recovery, which started in the 
second  part  of  2009,  came  to  a  halt  in  mid-2011. 
While activity resumed in the first quarter of 2012, 
it declined sharply again in the second quarter: the 
slow-down 
in  global  activity  coupled  with 
uncertainties  linked  to  the  sovereign-debt  crisis 
and  negative  confidence  effects  resulted  in  a 
contraction  of  0.5%  q-o-q.  For  the  second  half  of 
the  year,  economic  activity  is  projected  to  remain 
anaemic, with quarterly growth figures stagnating, 
implying  that  for  the  year  as  a  whole  GDP  is 
expected to decrease by 0.2%. 

Graph II.1.1:Belgium - GDP growth and contributions

forecast

pps.

4

3

2

1

0

-1

-2

-3

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Dom. demand, excl. invent.

Inventories

Net exports

GDP growth (y-o-y%)

is  expected 

the  gradual  resolution  of 

GDP  growth  is  set  to  turn  positive  in  2013  and 
strengthen  to  1.6%,  slightly  above  potential,  in 
(23)  Indeed,  due  to  the  high  degree  of 
2014. 
openness  of  the  Belgian  economy,  the  current 
slowdown  in  world  trade  is  likely  to  delay  the 
recovery until the first half of 2013, when demand 
to  pick  up  again. 
for  exports 
Concomitantly, 
the 
sovereign debt crisis  would restore household and 
business  confidence,  timidly  pushing  up  domestic 
demand.  Private  consumption 
to 
increase  only  modestly  in  2013,  given  rising 
unemployment,  weak  disposable  income  growth, 
and  the  stabilisation  of  the  saving  rate.  Finally,  a 
still fragile financial sector will not foster domestic 
demand, although it should not represent a drag on 
growth  either.  In  2014,  confidence  is  expected  to 
strengthen,  while  the  unemployment  rate  should 
is 
broadly  stabilise  and  disposable 

is  expected 

income 

(23)  The  impact  of  the  planned  closure  of  the  biggest  Belgian 
car plant, announced after the cut-off date of the forecast, is 
not included in this forecast. 

50 

to 

increase 

further.  Against 

projected 
this 
background,  domestic  demand  is  expected  to 
contribute  by  more  than  1  pp.  to  growth.  In 
parallel,  imports  will  accelerate,  but  with  exports 
solidly  recovering  from  mid-2013,  the  current 
account  should  still  improve  slightly,  attaining  a 
surplus of around 1% of GDP. Hence, net exports 
will contribute positively over the forecast horizon, 
mainly  due  to  the  dynamism  of  the  services 
balance. However, there will be no gains in market 
share due to losses in cost competitiveness.  

in 

line  with 

Private  investment  became  negative  this  year  due 
to increased uncertainty about economic prospects 
and  a  capacity  utilisation  below  its  long-term 
average.  Besides  a  decline  in  the  demand  for 
credit,  recent  data  also  points  to  a  tightening  of 
credit conditions for companies. In 2013 and 2014, 
business  investment  is  projected  to  gradually 
in 
accelerate, 
confidence. In 2012, the negative developments in 
household real disposable income have weighed on 
demand 
construction 
investment.  From  2013  onwards,  housing 
investment 
the 
background  of  the  2012  local  elections,  judging 
from  past  experience,  public 
is 
projected  to  have  remained  upbeat  in  2012  but  to 
drop by about 10% in 2013. 

recover.  Against 

for  mortgages 

improvement 

investment 

should 

and 

the 

the 

There are important downside risks to this growth 
scenario.  Apart  from  the  general  risks  related  to 
the  international  economic  environment  and  the 
sovereign  debt  crisis, 
impact  of  further 
budgetary  consolidation  measures  may  delay  the 
improvement  in  domestic  demand.  On  the  other 
hand,  the  budgetary  consolidation  could  further 
reduce  interest  spreads  while  confidence  may 
improve  faster  than  expected  in  view  of  the  long-
term benefits of healthy public finances.  

…resulting  in  a  deterioration  of  the  labour 
market and a slowdown in inflation 

In  view  of  the  weak  economic  environment,  job 
creation is projected to have stagnated in 2012 and 
to  accelerate  only  moderately  over  the  forecast 
horizon.  This  will  be  insufficient  to  offset  the 
force,  and 
the 
dynamic  growth 
consequently the unemployment rate is forecast to 
rise,  from  7.2%  in  2011  to  7.8%  in  2014,  even  if 
contained  by  government  measures  such  as 

labour 

in 

Member States, Belgium 

the no-policy-change  assumption, 

(0.2%  of  GDP),  that had  been  announced  but not
yet  specified  by  the  cut-off date  of  the  forecast.
i.e.
Under 
without  the  additional  measures for  2012  and
without  a  2013  budget which was  also  not yet
available,  the  deficit  would  start  to  rise  again  in 
2013, despite the projected acceleration in growth. 
This  is  in  part  explained  by  the  many  one-off 
measures in the 2012 budget (about ½% of GDP).
A  further  rise  in  the  deficit  is forecast  in  2014, 
the
although  better  economic  conditions  and 
impact of recent structural reforms are expected to
curb  the  deterioration.  In structural  terms,  the
deficit  is  projected  to  have declined  in  2012  by
about 0.7 pp. of GDP (after having deteriorated by
0.1 in 2011), to remain broadly stable in 2013. 

The  general  government  debt  reached  97.8%  of
GDP in 2011. In 2012, the debt ratio is projected to
rise  just  below  100%  of  GDP.  Under  the  current
growth and deficit projections, it continues to rise 
slightly  over  the  forecast  period.  Moreover,  the 
large  contingent  liabilities stemming from  the
guarantees given  to financial  institutions  and
possible recapitalisation needs represent a risk for
public finances.

subsidised  service  cheque jobs.  Inflation has
remained relatively high at 2.6% in 2012 due to a 
rise  in  oil  prices,  which  tend  to  have  a  larger 
impact on inflation in Belgium than on average in
the  euro  area.  Under 
the  current  oil-price
assumptions, inflation is expected to slow down to
1.8% in 2013 and 1.6% in 2014, tempering also the
impact  of 
indexation
the  automatic wage 
mechanism on unit labour costs. 

…while  improvements  in  public  finances  are
not yet durable

(revised 

the  rising 

The  national  authorities made  a  commitment  to
reduce  the  general  government  deficit  from  3.7%
of  GDP  in  2011  to  2.8%  of  GDP  in  2012.  The
2012  budget 
in  March)  contained
substantial  consolidation measures  in  order  to
address  the  deterioration  in economic  conditions
in public  expenditure, 
and 
especially  on  health  care  and  pensions.  In  the
meantime,  the  economic  situation has  further 
deteriorated.  So  far,  (cash-based)  fiscal  revenues
remain  rather  dynamic,  but  a  slowdown  towards
the  end  of  the  year  is  expected.  All  in  all,  the
general government deficit should be 3.0% of GDP
in 2012. This figure does not yet take into account
the  additional  measures,  of  around  EUR  800  mn

trend 

Table II.1.1:
Main features of country forecast - BELGIUM
2011

Annual percentage change

bn EUR Curr. prices
369.8

% GDP
100.0

92-08
2.1

2009
-2.8

2010
2.4

2011
1.8

2012
-0.2

2013
0.7

2014
1.6

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

194.7

90.1

76.4

32.1

311.9

307.4

373.9

52.6

24.4

20.7

8.7

84.3

83.1

101.1

Domestic demand
Inventories
Net exports

1.6

1.7

2.5

2.8

4.5

4.4

2.1

1.7

0.1

0.3

0.6

1.9

-8.4

-11.1

-11.1

-10.6

-4.8

-1.1

-1.1

-0.5

2.7

0.7

-1.4

-3.9

9.6

8.9

5.1

1.3

0.3

0.7

0.2

0.8

4.1

9.3

5.5

5.6

0.9

1.1

0.6

0.0

1.8

7.2

1.4

1.2

7.9

8.3

0.9

3.0

1.4

8.3

0.7

-0.2

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

109.9

95.7

95.5

97.8

18.3

15.4

14.4

17.7

-2.3

-2.1

-2.1

-3.4

-0.8

-3.9

-0.4

-0.7

-3.3

-2.2

-4.5

-3.3

-3.6

-2.0

-5.5

-3.8

-3.7

-0.3

-0.2

-0.5

2.6

3.5

2.0

2.1

2.8

4.2

4.1

0.0

1.2

2.0

2.3

0.7

3.0

0.3

2.9

2.0

3.5

1.0

0.9

3.1

0.6

3.8

2.7

-

-0.6

0.4

-0.1

0.6

-0.7

-0.9

-0.2

-0.2

-0.1

0.1

0.1

7.5

3.1

3.4

1.2

14.8

2.2

2.6

-0.5

-1.1

0.7

0.8

-3.0

-2.3

-2.7

99.9

0.4

0.9

0.5

0.4

1.9

1.6

0.7

0.5

0.0

0.2

0.3

7.7

2.5

2.1

0.0

14.9

2.1

1.8

0.1

-1.0

0.9

1.0

-3.4

-2.7

-2.7

1.3

1.4

1.6

2.0

3.9

3.6

1.6

1.3

0.0

0.3

0.5

7.8

2.6

1.5

-0.3

14.5

1.8

1.6

0.0

-1.2

1.2

1.3

-3.5

-3.1

-3.1

100.5

101.0

51

2.  BULGARIA 

Domestic demand sustaining growth 

Graph II.2.1:Bulgaria - Employment growth, current-
account balance and contributions to GDP growth

pps.

% of GDP

forecast

15
10
5
0
-5
-10
-15
-20
-25

15
10
5
0
-5
-10
-15
-20
-25

03

04

05

06

12

13

14

11

10

07

09

08
Net exports
Inventories
Domestic demand, excl. invent.
Employment growth (y-o-y%)
GDP growth (y-o-y%)
Current-account balance (rhs)

Risks  related  to  this  baseline  scenario  seem 
broadly  balanced.  On  the  downside,  a  reversal  of 
the  current  positive  momentum  in  household 
consumption  in  the  face  of  continued  euro-area 
turbulence is the major risk. On the upside, exports 
could develop more favourably if the past trend of 
gains in global market shares resumes.  

Weak labour market, but rapid wage growth  

The employment level fell by 4.2% in 2011, even 
with real GDP having turned positive in that year. 
In  2012,  employment  is  forecast  to  decline  by  a 
further 2%, before stabilising in 2013 and turning 
to  slight  growth  in  2014.  Declining  employment 
also reflects a strong decline in the labour force on 
account 
trends. 
Unemployment is expected to increase from 11.3% 
of the labour force in 2011 to 12.7% in 2012 and to 
remain  broadly  unchanged  over 
the  forecast 
horizon.  The  protracted  weakness  in  the  labour 
long-term 
market 
unemployment and structural skill mismatches.  

demographic 

negative 

rising 

could 

lead 

of 

to 

At the same time, growth in wages and unit labour 
costs  is  foreseen  to  remain  relatively  strong. 
Wages are being pushed up by  wage convergence 
pressures  from  the  lowest  levels  in  the  EU, 
impacted  by  emigration.  Also,  mounting  labour 
market  mismatches  would  lead  to  wage  pressures 
in  line  with  the  expected  pick-up  in  economic 
activity, even with a relatively high unemployment 
rate. 

Domestic demand compensating for exports  

GDP  growth  has  decelerated  to  below  1%  in 
annual terms in the first two quarters of 2012 from 
1.7%  in  2011.  The  initial  phase  of  the  economic 
recovery over 2010-11 was characterised by strong 
exports, while domestic demand remained weak in 
the aftermath of the boom-bust cycle. Data for the 
first half of 2012 indicate a change in this pattern, 
with  domestic  demand  taking  over  as  the  main 
growth driver, while net exports turned negative. A 
recovery  in  private  consumption  was  the  main 
factor  behind 
in 
inventories. After three years of strong contraction, 
investment  activity  also  appears  to  be  stabilising 
over  the  first  half  of  2012,  supported  mainly  by 
public  projects  and  some  recovery 
in  FDI, 
especially in the energy sector.  

this,  along  with  growth 

GDP growth to pick up gradually  

The  recent  growth  pattern  is  forecast  to  continue, 
with  domestic  demand  leading  the  recovery.  Net 
exports  are  expected  to  contribute  negatively  to 
growth  in  2012  and  2013  and  less  so  in  2014.  In 
spite of an adverse economic setting in the EU and 
an overall weak labour market in Bulgaria, GDP is 
projected to grow by 0.8% in 2012, 1.4% in 2013 
and  2%  in  2014,  supported  by  a  stable  overall 
domestic  economic  environment  and  relatively 
strong  public 
finances  upholding  consumer 
confidence.  In  addition,  recent  monthly  data  from 
the  banking  sector  suggest  a  downward  trend  in 
both  deposit  and  lending  interest  rates.  Lower 
lending  rates  are  expected  to  support  a  modest 
growth  in  credit  with  a  possible  lagged  effect  on 
consumption.  

incomes  and  a  gradual  recovery 

Household  consumption  is  forecast  to  recover 
further in 2013-14, assuming a continuous increase 
in 
in  real 
household  confidence.  Investment  is  expected  to 
be  initially  supported  by  public  sector  projects 
funded  by  the  EU.  Going  forward,  private  sector 
investment  is  also  expected  to  pick  up  from  the 
current  relatively  low  post-crisis  levels,  in  line 
with  the  economic  recovery.  Export  trends  are 
forecast to follow the expected gradual recovery in 
EU  markets  in  2013.  Given  the  high  import 
content  of  Bulgarian  domestic  consumption  and 
investments, the current account is forecast to slide 
into a deficit of 2½% of GDP by 2014.  

52 

Member States, Bulgaria

Inflation to level off after a peak in mid-2012 

Inflation  accelerated  over  2012,  especially in  the
third  quarter,  reflecting hikes  in  global  energy,
food and some administrative prices. Nevertheless,
core  inflation  (excluding  energy  and  unprocessed 
food  prices)  remained  more moderate,  slightly
above 1% y-o-y. Assuming a stabilisation of global
energy  and  food  prices  going  forward,  headline
HICP  inflation  is  expected  to  level  off  at  2.6%  in
2013  and  2.7%  in  2014.  At  the  same  time,  core 
inflation  is  projected  to  pick  up  to  some  extent
given  the  rise  in  unit  labour  costs,  the  steady
recovery  in  household  demand  and  the  ongoing 
convergence  of  domestic  prices 
towards  EU 
averages.

Fiscal position to stay relatively strong

The  general  government  deficit  is  set  to  narrow
from  2%  of  GDP  in  2011  to  1.5%  in  2012.  The
first half  of  2012  was marked  by  exceptionally 
strong revenue collection, primarily on account of 
VAT  revenues,  which were  boosted  by  strong

domestic  demand  and  imports.  Moreover,  the
government  took  an  important  step  forward  in 
improving  tax  compliance  by  linking  all  retailers' 
cash  registers  online  to  the  National  Revenue
Agency  as  of April  2012.  Similar  measures  were
also taken to increase compliance  with excise and
import taxes.

to 

The fiscal deficit is set to remain at 1.5% in 2013, 
and  to  slightly  improve  to  about  1%  of  GDP  in
2014.  Even  though  the  favourable  revenue  trends 
are  expected  to  continue in  2013,  expenditure  is
also  expected 
increase  substantially.  The 
forecast takes account of the measures included in 
the  government's  2013  draft  budget  proposal
presented to the parliament in early October. Most 
notably,  it  foresees  an  increase  of  pensions  by
9.3%  as  of  1 April  2013. Overall,  the  budget
implies  a  neutral  fiscal  stance  in  2013  and  2014,
with the  structural  deficit  estimated  to  remain
broadly  stable  at  slightly  below  1%  of  GDP. 
General government  gross  debt  is  envisaged  to
increase  from  around  16½%  of  GDP  in  2011  to 
18½% of GDP in 2014.

Table II.2.1:
Main features of country forecast - BULGARIA

2011

Annual percentage change

bn BGN Curr. prices
75.3

% GDP
100.0

92-08
2.5

2009
-5.5

2010
0.4

2011
1.7

2012
0.8

2013
1.4

2014
2.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

45.7

11.7

15.7

-

50.1

49.6

71.9

60.7

15.5

20.9

-

66.5

65.8

95.5

Domestic demand
Inventories
Net exports

3.1

-1.9

-

-

-

-

-

-

-

-

-7.6

-6.5

-17.6

-45.0

-11.2

-21.0

-3.1

-12.0

-3.4

10.0

0.1

1.9

-18.3

-18.5

14.7

2.4

0.6

-4.9

-0.4

5.6

-0.6

0.5

-9.7

-

12.8

8.5

1.0

-2.5

1.8

2.3

-

-

-

-

9.4

6.8

-4.7

-2.6

-4.2

11.2

11.3

10.3

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-12.0

-10.0

14.6

12.7

16.3

40.8

16.2

-7.7

-5.1

-1.3

-1.3

-2.0

-3.7

-3.1

-3.1

-4.3

-3.0

-1.8

-1.7

-3.1

-3.7

-7.3

-7.6

-7.3

-9.0

-0.4

1.7

5.0

1.1

8.1

4.3

5.6

2.7

2.8

0.6

7.3

2.5

3.0

2.3

3.4

1.4

0.3

2.9

-

-

-

-

-

-

-

-

-

 Note : Contributions to GDP growth may not add up due to statistical discrepancies.

3.0

0.3

0.2

-

1.7

4.6

1.8

1.9

0.7

-1.9

-2.0

12.7

5.2

2.3

1.3

-

1.0

2.5

-3.0

-9.1

-1.6

-0.2

-1.5

-0.8

-0.8

19.5

3.1

1.1

3.4

-

3.4

5.3

1.7

2.8

0.0

-1.5

-0.2

12.7

4.8

3.2

0.8

-

2.3

2.6

-0.5

-10.9

-2.1

-0.6

-1.5

-0.9

-0.9

18.1

3.5

0.5

4.1

-

4.4

5.7

2.1

3.2

0.0

-1.2

0.4

12.5

5.5

3.8

1.2

-

2.5

2.7

-0.2

-12.3

-2.5

-0.8

-1.1

-0.6

-0.6

18.3

53

3.  THE CZECH REPUBLIC

Low consumption weighs on the economy

The  Czech  economy  entered  recession  in  the
second  half  of  2011.  Based  on  the  contraction  in
the  first  two  quarters  of  2012  and  a  deteriorating 
outlook, real GDP is expected to fall by 1.3% for 
the  year  as  a  whole.  Against  the  background  of 
continuing fiscal  consolidation  and 
increased
economic  uncertainty,  weak  domestic  demand is
expected to act as the main drag on growth in 2012 
despite  easier  financial  conditions.  Real  GDP
growth  is  projected  to  bottom  out  in  2013  but  is
expected to remain below potential also in 2014. 

From contraction to subdued growth 

the 

situation 

In  the  first  half  of  2012,  household  consumption 
posted  a  record  decline  of -2.8%,  the  strongest
decrease  since  1996.  Real  disposable  income
contracted  due  to  sluggish growth  in wages  and
elevated  inflation,  fuelled  by  an  increase  in  the
lower rate of VAT from 10% to 14%. At the same
time,  household  savings  rose  in  anticipation  of 
further  fiscal  retrenchment.  On  the  back  of  the
worsening 
labour market, 
in 
household consumption is expected to stall in 2013
and recover somewhat only in 2014. However, the
forecast does not include the revenue consolidation 
measures for 2013, rejected by the Parliament and 
awaiting  new discussion  which  would  further
weigh  on  consumption.  Fixed  capital  formation  is
expected  to  provide  a  negative  contribution  to
growth  in  2012.  Construction  investment
fell
considerably  in  the  first  half  of  the  year  and  the
low number  of new  building permits  and  the  still
subdued  volume of public  investments do  not
augur  well  for  a  quick  recovery  in  this  sector.
However, since both domestic demand and foreign 
demand  remain weak  and  capacity  utilisation  is
below its long-run average, even lower investment
activity  is  considered  a  negative  risk  to  the
forecast.  

The  slowdown  in  the  key EU  trade  partners  is
projected  to  impede  growth in  Czech  exports  in
2012  despite  sizeable  market  share  gains  in non-
European  economies.  Both  export  growth  and 
potential  output growth  are  expected  to  remain
below  their  pre-crisis  levels  as  the  inflow  of
export-oriented  foreign  direct
investment  has
substantially eased. The rate of growth of imports
is  also forecast  to  decelerate,  given  the  high 
import-intensity  of  exports  and  the  lacklustre
performance of domestic absorption. However, net

54

exports  are  likely to  remain  relatively  strong  over
the  forecast  years  and  the  improved  trade balance 
is expected to be reflected in a further shrinking of 
the current-account deficit.

Graph II.3.1:The Czech Republic - GDP growth and 
contributions, output gap

pps.

8

6

4

2

0

-2

-4

-6

% of pot. GDP

forecast

8

6

4

2

0

-2

-4

-6

07

08

09

10

11

12

13

14

Output gap (rhs)

Net exports

GDP (y-o-y%)

Inventories

Dom. demand, excl. invent.

Inflation is projected to reach 3.6% in 2012 before
falling well  below  2%  in  both  2013  and  2014.
High inflation in 2012 is predominantly driven by
the hike in the lower VAT rate, higher energy and
food  prices,  and  continued  deregulation  of  rents.
The forecast includes the unification of VAT rates
(currently  at  14%  and  20%)  into  a  single  17.5% 
rate planned for 2013. This should have a broadly
neutral impact on inflation. While the effects of the 
bad harvest in 2012 on food prices are expected to
persist  into  2013,  energy  inflation  is  projected  to
slow  down  over  the  forecast  horizon.  Prices  of 
goods  (excl.
food  and  energy)  are  likely  to
continue to fall in view of the tight competition on
domestic  retail markets,  thus  keeping  overall 
inflation subdued.

The labour market has so far been spared from the
full impact of the recession due to the willingness
of  firms  to  cut  working  hours  rather  than  jobs.
However,  the  unemployment  rate  is  expected  to
peak at 7.3% in 2013, up from 6.7% in 2011, and
to ease only gradually as long-term unemployment
is likely to increase.

Persistent public deficits  

After  the  sizeable  reduction  achieved  in  2011 
partly  on  account  of  a significant  drop 
in 
investment,  the  general  government  deficit  is
expected  to  increase  slightly  to  3.5%  of  GDP  in 
2012.  The  deterioration  in  the  deficit  outlook 
of  macroeconomic
reflects

the  worsening 

Member States, The Czech Republic

the  revenue-decreasing  impact  of  the  planned
introduction  of  the  fully-funded  pension  pillar 
(0.2%  of  GDP),  as  its  launch  in  2013  is  still
uncertain.  The  structural  balance  is  expected  to
deteriorate slightly in 2013 to 2½% of GDP. 

improvement  of 

the
The  projected  moderate 
general  government  balance  in  2014  is  driven
predominantly by more favourable macroeconomic
conditions.  This  is  based  on  a  no-policy-change
assumption  and  includes  only  further  across-the-
board  cuts  in  government  consumption  at  the
central  level  (0.3%  of  GDP).  The  debt-to-GDP
ratio  is  expected  to  increase  over  the  forecast
horizon, reaching around 48% of GDP in 2014. 

The  fiscal  forecast  is  subject  to  two  major  risks. 
The adoption of the law on financial compensation
to  churches,  still  under  discussion in  Parliament,
would imply a one-off increase in the deficit by 1.5 
pps.  of  GDP  in  the  year  of  its  entry  into  force. 
Furthermore, problems in the administration of EU
funds  at  national  level  entail  that  part  of the
advance  financing  from domestic  sources will not
be fully reimbursed,  which  will  mostly affect the 
deficit in 2012.

conditions.  Currently  available  data  reveal  major 
revenue  shortfalls  compared  to  the  budget,  in
particular  from  VAT  and  excise  duties  (around
private
0.5% 
of  GDP),  mirroring weak 
consumption.  Savings  are  expected  on 
the
expenditure  side,  mainly  in  interest  payments  and
intermediate  consumption  but  these  will  only
partly compensate for the loss in revenue.

the 

expected 

improvement 

Despite 
in
macroeconomic  activity, the  general  government
budget  is  projected  to  remain  broadly unchanged, 
reaching  3.4%  of  GDP  in  2013.  While  the  draft
2013 budget includes a package of expenditure and 
revenue-side measures amounting to net savings of
around  1.4%  of  GDP,  the  forecast  only  takes  into
account  the  expenditure-side measures,  notably  a
freeze  in  public  sector  wages,  across-the-board 
cuts  in  government  consumption  at
the  central
level  and  lower  indexation of  pensions.  On  the
revenue  side,  the  forecast  is based  on  the  already
adopted  unification  of  both  VAT  rates.  The 
revenue-side  measures  (0.7%  of  GDP),  recently
rejected  by  the  Parliament  and  awaiting  new
discussion  are  not  included  in  the  forecast.  The
revenue  package  comprised  an  increase  in  both 
VAT rates as well as in excise duties and personal
income  tax.  The  deficit  projection  also  excludes

Table II.3.1:
Main features of country forecast - THE CZECH REPUBLIC

2011

Annual percentage change

bn CZK Curr. prices
3841.4

% GDP
100.0

92-08
3.2

2009
-4.5

2010
2.5

2011
1.9

2012
-1.3

2013
0.8

2014
2.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

1950.2

792.9

917.3

394.8

2786.8

2632.3

3572.2

50.8

20.6

23.9

10.3

72.5

68.5

93.0

Domestic demand
Inventories
Net exports

3.4

1.2

5.6

7.5

10.2

11.8

-

3.5

0.1

-0.4

0.2

4.0

-11.0

-18.8

-8.9

-9.9

-6.5

-2.1

-2.9

0.5

1.0

0.5

1.0

6.0

15.5

15.8

1.6

0.9

1.2

0.5

0.7

-2.5

-0.7

0.0

9.4

6.7

2.4

-0.4

0.2

2.0

-

-

-

-

6.7

7.3

6.7

3.6

0.3

-1.0

-0.6

-1.8

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

34.2

11.2

40.8

37.8

11.3

-3.3

-3.2

-3.3

-5.4

-5.8

-5.8

-0.1

-4.7

-4.8

-4.8

-3.0

-3.0

-3.3

-5.2

-3.9

-1.2

-3.1

-2.0

-0.8

-2.6

-2.3

-1.4

-2.2

9.6

2.7

1.4

1.9

0.6

9.8

2.3

2.2

1.2

0.0

6.0

2.3

2.1

2.3

1.4

1.1

-

-

-

-

-

-

-

-

-3.3

-1.3

-1.7

2.4

3.9

1.1

-1.1

-2.3

-1.0

2.1

-0.4

7.0

2.8

3.7

2.6

10.7

1.1

3.6

-1.7

3.2

-2.9

-1.2

-3.5

-2.7

-2.5

45.1

0.4

-0.5

0.1

2.6

3.9

3.4

0.8

0.1

0.1

0.6

-0.2

7.3

2.0

0.9

-0.3

10.3

1.3

1.1

0.3

3.8

-2.1

-0.2

-3.4

-2.4

-2.6

46.9

1.4

0.2

2.1

3.5

6.2

5.6

1.9

1.2

0.0

0.8

0.0

7.1

2.6

0.6

-0.5

10.1

1.1

1.1

-0.2

4.2

-1.3

0.5

-3.2

-2.4

-2.4

48.1

55

4.  DENMARK 

Muted growth in a phase of adjustment 

is expected to drop. Continued excess capacity and 
tight  credit  conditions  are  likely  to  continue  to 
dampen private investment somewhat. At the same 
time, however, the increased incentives introduced 
by the government to bring forward investment to 
this  year  and  next  are  expected  to  prop  up 
investment  –  although  there  is  a  high  degree  of 
uncertainty  about  the  extent  to  which  the  more 
favourable  tax  treatment  of  write-offs  will  be 
decisive for the private sector. Overall, total gross 
fixed  capital  formation  is  forecast  to  accelerate 
throughout this year and next before slowing down 
in 2014. 

As  in  2011,  public  consumption  this  year  appears 
to  be  lower  than  the  amount  budgeted,  probably 
reflecting  the  recent  years'  initiatives  to  reinforce 
expenditure  control.  Thus,  public  consumption  is 
expected to be raised accordingly next year and in 
2014,  bringing  it  into  line  with  the  planned 
amounts, and to contribute moderately to growth. 

Adjustment in employment soon over 

Overall,  private  employment  and  unemployment 
have  stabilised  since  the  beginning  of  2010,  and 
the  moderate output  growth has been achieved by 
an increase in labour productivity towards the pre-
crisis level. Although the downward adjustment in 
employment  is  considered  to  be  largely  over,  the 
expected  growth  rates  will  be  enough  to  ensure  a 
small  rise  in  private  employment  only  in  2014. 
Nevertheless,  total  employment  is  set  to  increase 
already  from  next  year  onwards,  as  public 
line  with  public 
employment  should  rise 
in 
consumption.  Unemployment 
to 
is  expected 
remain stable in 2012-14. 

Improvements in cost competitiveness… 

Wage  growth  is  expected  to  be  below  that  of 
Denmark's  trading  partners  during  the  forecast 
horizon,  and  real  unit  labour  costs  are  set  to 
decline further as productivity growth continues to 
catch  up  to  its  pre-crisis  trend.  An  expected 
depreciation  of  the  real  effective  exchange  rate, 
especially  in  2012,  will  also  contribute  to  an 
improvement of Denmark's competitive position. 

After  a  year  of  export-driven  growth  of  0.8%  in 
2011,  during  which  domestic  demand  contributed 
negatively  to  economic  activity,  the  prospects  for 
Danish exports are significantly more subdued this 
year as a result of the slow and protracted recovery 
in Europe and the slowdown in emerging markets. 
At the same time, the associated uncertainty in the 
international environment has resulted in tightened 
credit  conditions  in  Denmark,  thereby  adversely 
affecting 
the  propensity  of  businesses  and 
households  to  invest  and  consume.  In  addition, 
consumption and investment are dampened by the 
need  for  deleveraging  in  the  private  sector  – 
especially  among  households  –  as  a  result  of  the 
rise  in  debt  levels  during  the  housing  bubble  and 
the period of excess demand preceding the crisis.  

Nevertheless,  domestic  demand  is  expected  to  be 
the  main  growth  driver  this  year  and  next,  while 
exports  should  gradually  gain  strength  towards 
2014  in  line  with  rising  demand  from  Denmark's 
main export partners. Domestic demand is set to be 
sustained by a number of government initiatives in 
2012 and 2013, including the "kick-start" stimulus 
package, the pay-out of voluntary early retirement 
pension  (VERP)  contributions,  the  tax  reform 
agreed in spring, and a temporary  modification of 
depreciation  allowances  for  certain  investments. 
Overall,  GDP  is  expected  to  rise  by  0.6%,  1.6% 
and 1.3% respectively over the forecast horizon.    

Downside risks to domestic demand 

total  amount  of 

The 
the  payout  of  VERP 
contributions  to  households  by  1  October  2012 
was  larger  than  anticipated,  and  the  associated 
increase  in  disposable  income  should  provide  a 
boost  to  private  consumption  in  the  remainder  of 
this  year  and  into  next  year.  The  projection  for 
private  consumption  in  2013  is  also  underpinned 
by an increase in disposable income as a result of 
the  recent  tax  reform,  and  –  as  the  need  for 
deleveraging is gradually reduced and the situation 
in 
improves  –  private 
consumption should continue to grow at moderate 
pace in 2014. 

labour  market 

the 

Public investment and initiatives in relation to the 
"kick-start" stimulus package are assessed as being 
broadly implemented, albeit  somewhat lower than 
planned and subject to downside risks. In 2014, as 
the temporary stimulus falls out, public investment 

56 

Member States, Denmark

sustain  export  growth  –  at  a  moderate  level  –  in
2012  and  2013.  In  2014,  as  the  economic  cycle
gains more  momentum,  Denmark  is  again  set  to
lose export market shares. Import growth is set to
decrease in 2012 before picking up considerably in
2013  and  subsequently 
to  show  a  moderate
development in 2014 in line with final demand. 

Deficit below 3% of GDP in 2013 

are 

only 

contributions 

The government deficit will widen this year, as the
negative  budgetary  impact  of  lower GDP  growth,
higher public investment and the one-off payout of 
VERP 
partly
counterbalanced by higher expected revenues from
tax on pensions in 2012 than in 2011. In 2013, the 
deficit  is  reduced,  as  the  budgetary  effect  of  the
one-off payout of VERP contributions falls out. At
the  same time,  the  tax  reform  agreed  in spring
the  budget  balance,
to 
contributes  positively 
including a one-off revenue of DKK 5 billion from
capital  pension  taxation  according  to  government 
estimates.  This  revenue  estimate  is  very  cautious, 
and  the  government  budget  balance  for  2013, 
expected  at  -2%  of  GDP,  may  surprise  on  the
upside.

Graph II.4.1:Denmark - GDP growth and
contributions

pps.

forecast

15

10

5

0

-5

-10

-15

04

05

06

07

08

09

10

11

12

13

14

Imports

Exports

Domestic demand

GDP (y-o-y%)

… but export growth likely to be subdued

in 

cost 

improvement 

The 
competitiveness,
however,  is  likely  to  only  partly  restore  the
cumulative  loss  in  competitiveness  that  has  taken
place  over  the  last  decade.  Hence,  the  relatively
favourable development in export goods growth in
the  second  quarter  of  2012  and  in  recent  months 
probably  rather  reflects  the  large  share  of non-
cyclical  goods  in  Danish  exports which should  

Table II.4.1:
Main features of country forecast - DENMARK

2011

Annual percentage change

bn DKK Curr. prices
1782.5

% GDP
100.0

92-08
2.1

2009
-5.8

2010
1.3

2011
0.8

2012
0.6

2013
1.6

2014
1.3

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

865.3

509.5

305.8

110.9

959.0

862.5

48.5

28.6

17.2

6.2

53.8

48.4

1839.5

103.2

Domestic demand
Inventories
Net exports

2.0

2.1

3.7

4.0

4.8

6.0

2.3

2.3

0.1

-0.3

-4.2

2.5

-13.4

-14.6

-9.8

-11.6

-5.8

-4.2

-2.3

0.7

1.9

0.3

-3.8

2.2

3.2

3.5

2.0

0.3

1.0

0.0

-0.8

-1.3

0.2

-2.0

7.0

5.2

1.6

-0.7

0.3

1.2

2.1

7.6

1.8

6.0

5.6

0.7

3.5

2.7

7.5

-2.4

-0.4

-2.3

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

40.6

42.9

46.6

54.4

-1.6

-2.5

-1.8

-2.7

-0.4

-0.9

-4.6

0.0

6.4

2.1

2.0

0.9

3.3

2.1

2.2

0.4

0.4

8.2

8.0

1.1

1.0

3.9

2.2

4.5

3.3

2.5

2.8

3.3

5.5

0.8

3.3

5.6

0.5

1.6

7.7

0.8

2.7

2.9

6.6

6.9

0.4

0.0

0.0

0.5

5.6

0.5

4.5

-

0.9

0.2

1.6

6.0

2.5

3.3

0.5

0.8

0.0

-0.2

-0.3

7.7

1.7

0.9

-0.4

7.5

1.3

2.4

-1.3

2.1

5.6

5.4

-3.9

-1.8

-0.3

45.4

2.2

1.4

6.2

11.0

3.8

6.1

1.6

2.5

0.1

1.6

0.8

2.5

3.0

4.0

4.7

1.0

1.5

0.0

-1.0

-0.2

0.1

7.7

1.6

0.1

0.2

7.6

1.8

0.6

-1.4

-0.9

6.7

1.6

2.0

0.1

1.4

4.6

4.4

-2.0

-0.6

-0.8

44.7

6.9

1.5

1.7

0.1

0.9

4.2

4.3

-1.7

-0.6

-0.6

45.3

57

5.  GERMANY 

Robust consumption despite uncertain environment

Economic  activity  to  regain  momentum  in  the 
course of 2013 

After a slight decline in the fourth quarter of 2011,
German GDP rebounded at the beginning of 2012. 
An  expansion  of  0.5%  q-o-q  (seasonally  and 
working-day  adjusted)  in  the  first  quarter  was
followed  by  lower  growth  of  0.3%  q-o-q  in  the
second quarter. Growth in the first half of the year
was  driven  by  both  consumption  and  exports,
while  the contribution of  gross  fixed capital
formation was negative.

The weakening  of  growth  is likely  to  continue  in
the  second  half  of  the  year.  Although  recent  data
on industrial production and firms' still-favourable
assessment  of 
the  current  business  situation 
suggest  that  a moderate  expansion  of  GDP  has
taken  place  in  the  third  quarter,  expectations  of  a 
further flagging of growth in the fourth quarter are
underpinned  by  business  expectations  below  their
long-term  average, 
negative  export
expectations and an apparent fall in industry orders
after their slight recovery in the preceding quarter. 
This reflects the weakening of economic activity in 
important  trading  partner  countries  as well  as
uncertainty  related  to  the  euro-area  crisis,  which
weighs on investment.

slightly

Nevertheless,  the  fundamentals  of  the  German
economy  remain  intact.  Financing  conditions  are 
relatively favourable  and  German  firms  are 
benefitting from their strong competitive positions
as  well  as  the  regional  diversification  of trading
partners.  Moreover,  domestic  demand  should
continue  to  be  underpinned  by  both  consumption 
turn
and  housing 
supported  by  robust  labour  market  conditions  and 
low  interest  rates.  Thus,  along with  dissipating
uncertainty, economic growth is expected to regain
momentum in the course of next year, returning to
its medium-term  trend  and  partly  closing  the
negative  output gap  in  2014.  After  a  moderate
growth rate of 0.8% in both 2012 and 2013, GDP
is projected to expand by a healthy 2.0% in 2014.

investment, which  are 

in 

Robust  labour  market  and  low  interest  rates
promoting private consumption 

Employment  growth  is  projected  to  continue  over
the forecast horizon, while the downward trend in 
unemployment is expected to stall. The still-robust

58

labour  market,  combined  with  significant  wage
increases,  should  bolster  private  consumption.
Indeed, income expectations and the propensity to 
buy have remained resilient, although employment
growth has  decelerated  for  some  months  and 
economic sentiment has deteriorated. Furthermore,
low  interest  rates  stimulate  private  consumption
and housing  investment.  As  of  next  year, private
consumption growth is expected to exceed the rise
in disposable income, which is partly slowed down
by progressive income taxation, implying a return 
in 2013 to the downward trend in the savings rate
observed in recent years.  

Graph II.5.1:Germany - GDP growth and
contributions, output gap

pps. 

6

4

2

0

-2

-4

-6

% of pot. GDP

forecast

6

4

2

0

-2

-4

-6

05

06

07

08

09

10

11

12

13

14

Output gap (rhs)
Investment
Gov. consumption
GDP growth (y-o-y%)

Net exports
Priv. consumption
Inventories

Uncertainty restraining investment

Investment  slumped  during  the  first  two  quarters 
of  2012.  Prevailing  uncertainty  appears  to  have
increased  the  reluctance  of  firms  to  invest  in
machinery and equipment, in particular. However,
financing  conditions  are  favourable  and 
the
realisation  of  postponed  investments  in  replacing 
or  upgrading  production  equipment  is  likely  to
become  more  urgent.  Although below-average
capacity  utilisation  suggests  a  limited  need  for 
expansion of production capacity in the short term,
firms  are  reported  to  be  planning  investments  in
changing  and  expanding  their  product  range,
implemented  once
which  are 
to  be 
uncertainty 
external
environment  improves.  In  contrast,  the  prevailing
fostering  housing 
uncertainty 
to  be 
investments,  which  are  expected 
to  continue
growing vibrantly.  Overall,  after  declining  by
to  regain
investment 
1.2% 
momentum and to grow by 1.9% in 2013 and 4.1%
in 2014.

likely 
dissipates 

in  2012, 

seems 

and 

the 

set 

is

Consumption supporting imports 

in 

surveys 

subdued 

The uncertain external environment is increasingly 
expected to take a toll on exports, as suggested by 
recent 
export 
indicating 
expectations. Export growth is expected to halve in 
2012,  while  picking  up  pace  again 
the 
subsequent  years  along  with  reviving  economic 
activity  in  trading  partner  countries  both  within 
and outside the euro area. While weak exports and 
equipment investment will affect imports of related 
intermediate  and  capital  goods,  robust  private 
consumption 
imports.  The 
should  underpin 
expected  reacceleration  of  exports  and  investment 
over  the  forecast  horizon  will  give  an  additional 
is 
boost 
projected to outperform export growth in 2013 and 
2014.  Import  prices  should  increase  at  a  slower 
pace  due  to  declining  energy  prices.  Yet,  the 
worsening  of  the  terms  of  trade  is  expected  to 
continue, although at a slower rate, since exporters 
may have less scope to pass on the projected rise in 
unit  labour  costs.  This  implies  that  profit  margins 
should  decline  further  and  that  Germany's  current 
account  surplus  should  continue  to  diminish  over 
the forecast horizon. 

imports.  Hence, 

import  growth 

to 

Employment growth decelerating  

firms  used 

flexible  working 

After a marked rise in employment since 2010, the 
pace of the increase has subsided in recent months. 
Recruitment  plans  of  businesses  have  become 
more  cautious  in  light  of  the  subdued  growth 
outlook for the coming months. However, although 
declining,  the  number  of  registered  vacancies  and 
employment  plans  of  companies  do  not  appear  to 
be  low.  Moreover,  during  the  deep  recession  of 
2008-09, 
time 
arrangements  to  retain  qualified  staff,  which  has 
allowed  them  to  react  flexibly  to  both  the  sharp 
slowdown  in  demand  and  the  subsequent  quick 
recovery.  In 
the  coming  quarters,  firms  are 
expected to make use of this flexibility once again, 
implying a reduction in  working time and leaving 
scope  for  a  small  expansion  of  employment  by 
0.2% in 2013, after 1.1% in 2012. In the course of 
2013,  working  time  is  projected  to  recover.  The 
rise  in  employment  has  been  accompanied  by 
further 
immigration 
increased  net 
improvement in labour force participation in recent 
quarters.  Although  the  waning  labour  demand 
should  slow  down  the  net  inflow  of  immigrants 
from  other  EU  Member  States,  it  is  likely  that 
labour  supply  will  slightly  outperform  labour 
demand next year, implying an increase of 0.1 pp. 
in  the  unemployment  rate.  In  2014,  employment 

and 

a 

Member States, Germany 

growth  should  accelerate  once  again  and  the 
unemployment  rate  should  return  to  its  level  of 
2012. 

Wages growing, inflation edging lower 

robust 

link  between  wages  and 

recently  agreed  wage 
Social  partners  have 
increases that will raise pay by about 5% over their 
duration. Given the gradual implementation of pay 
settlements, increases in negotiated wages in 2013 
are expected to be more pronounced than this year. 
In  addition,  employees  received  large  bonuses  in 
2012. These have been used by firms to establish a 
better 
the  business 
situation,  with a view to increasing flexibility and 
labour  market 
competitiveness.  The 
suggests  a  continuation  of  significant  wage 
increases  over  the  forecast  horizon,  following  an 
extended  period  of  wage  moderation  during  the 
last  decade.  Bonuses  are  also  expected  to  top  up 
wages, in particular once economic activity regains 
momentum after the current slow-down. However, 
the increase in compensation per employee will be 
lowered by a reduction in the pension contribution 
rate this and next year, leading to a steeper rise in 
projected growth rates from 2.6% in 2012 to 3.1% 
in 2014. The increase in employment is forecast to 
exceed output gains in 2012, which leads to a rise 
in unit labour costs of 2.8%. For the remainder of 
the  forecast  period  strengthening  productivity 
growth is expected to narrow the gap to growth of 
labour compensation to 1.5 pps. in 2014. 

The rise in excess capacity is likely to temporarily 
narrow  producers'  scope  for  passing-on  higher 
wages  to  consumers,  which  should  in  turn  limit 
price  pressures.  Overall,  an  increase  in  core 
inflation  from  1½%  to  2%  over  the  forecast 
horizon  is  projected.  The  recent  impact  of  rising 
energy prices on consumer prices is considered to 
be  temporary.  The  contribution  of  energy  to 
inflation is expected to fall once again, despite an 
increase  in  the  surcharge  on  electricity  prices  for 
feeding-in renewable energy. Headline inflation is 
therefore  forecast  to  remain  below  2%  as  of  next 
year, after 2.1% in 2012. 

Approaching a balanced budget 

Despite  the  moderate  growth  outlook,  the  general 
government deficit is projected to drop to 0.2% of 
GDP in 2012. This is partly due to the revision of 
the 2011 deficit from 1% of GDP to 0.8% of GDP. 
In  addition,  revenues  are  likely  to  increase  more 
strongly  and  expenditure  somewhat  more  slowly 

59 

European Economic Forecast, Autumn 2012

Bank and a second transfer of impaired assets from
WestLB  to  its  "bad  bank"  ("Erste  Abwicklungs-
anstalt")  will  impact  on gross  debt,  which  is
projected  to  rise  by  1.2  pps.  to  81.7%  of  GDP  in
2012. Further on, gross debt is projected to drop to
80.8%  of  GDP  in  2013  and  to  78.4%  of  GDP  in
2014  due  to  the  denominator  effect  of GDP
growth.  The  on-going  winding-up  of  "bad  banks"
could further reduce the debt stock.

6

5

4

3

2

1

0

-1

-2

Graph II.5.2:Germany - General government
gross debt and deficit

% of GDP

% of GDP
forecast

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Gross debt (rhs)

Deficit (lhs)

85

80

75

70

65

60

55

50

than  earlier  forecast.  In  particular,  the  robust
labour market and significant wage increases have
boosted  payroll-tax  revenues.  The  phasing-out  of 
the  remaining  stimulus measures  is  estimated  to
contribute around 0.4% of GDP to consolidation in 
2012.  On  the  other  hand,  the  projection  takes 
account of lower revenues due to a reduction of the
pension contribution rate by 0.3 pp. this year and a
further  0.7 pp.  to  18.9%  in  2013,  as well  as 
additional  expenditure  resulting from  the  agreed
wage increases for the public sector at federal and 
municipal levels for  2012  and  2013.  In  contrast, 
the tax reform proposed by the federal government
to  reduce  fiscal  drag  has  not  been  taken  into
account,  since  no political  agreement  has been
reached so far. In line with the growth outlook and 
the relatively favourable labour market projections, 
the  general  government budget  is  forecast  to
remain unchanged  at  a  deficit  of  0.2%  of  GDP  in
2013 and to be balanced in 2014. Accordingly, it is
estimated  that  the  structural  general  government
budget  balance  is  projected  to  turn  into  a  small
surplus  of  about  ¼%  of  GDP  in  2012  and  to 
broadly stabilise thereafter.  

The  euro-area  stabilisation measures,  the  increase
in the paid-in capital of the European Investment

Table II.5.1:
Main features of country forecast - GERMANY

2011

Annual percentage change

bn EUR Curr. prices
2592.6

% GDP
100.0

92-08
1.5

2009
-5.1

2010
4.2

2011
3.0

2012
0.8

2013
0.8

2014
2.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

1487.7

499.8

469.9

183.2

1300.8

1169.2

2640.9

57.4

19.3

18.1

7.1

50.2

45.1

101.9

Domestic demand
Inventories
Net exports

1.1

1.5

1.1

2.4

6.2

5.4

1.5

1.1

-0.1

0.5

0.1

3.0

-11.6

-22.5

-12.8

-8.0

-3.9

-1.5

-0.8

-2.8

0.9

1.7

5.9

10.3

13.7

11.1

3.7

1.9

0.6

1.7

1.7

1.0

6.2

7.0

7.8

7.4

2.9

2.2

0.2

0.6

0.8

5.9

1.4

2.4

0.2

7.1

7.8

0.6

0.1

8.9

0.2

2.0

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

16.3

17.0

16.9

16.5

59.4

74.5

82.5

80.5

-2.0

-0.7

-0.9

-2.3

-2.7

-3.1

-4.1

-0.8

-2.8

-0.9

-3.5

-0.9

-2.7

-1.1

-2.5

-0.6

4.4

1.3

4.6

1.4

1.4

1.2

0.9

5.6

6.3

6.0

6.1

6.0

6.1

0.8

6.0

5.6

5.6

3.0

0.6

0.2

1.2

0.2

5.6

1.4

2.5

6.0

-

-

1.0

1.2

-1.2

-3.0

3.9

2.7

0.7

0.6

-0.5

0.7

1.1

5.5

2.6

2.8

1.6

16.5

1.2

2.1

-0.7

6.3

5.7

5.5

-0.2

0.0

0.2

81.7

1.0

1.3

1.9

1.6

4.2

5.1

0.7

1.1

-0.1

-0.2

0.2

5.6

2.8

2.1

0.8

16.3

1.4

1.9

-0.4

5.7

5.0

4.9

-0.2

0.3

0.3

80.8

1.6

1.6

4.1

7.2

6.6

7.2

1.9

2.0

0.0

0.0

0.4

5.5

3.1

1.5

-0.1

16.0

1.6

1.8

-0.1

5.6

4.7

4.6

0.0

0.3

0.3

78.4

60

6.  ESTONIA 

Returning to balanced growth

Export growth expected to regain momentum

Strong  domestic  demand  and  favourable  labour 
market  developments  are  the main  growth  drivers 
in  2012.  Although  Estonia's  economy relies 
heavily on the Nordic countries, which seem to be 
resilient  in the  sovereign-debt crisis, some growth
momentum  was  lost  due  to a  weakening external
demand  and  exports.  Therefore,  economic  growth
is forecast  to  slow  down  to  2.5%  in  2012  from
export-led 8.3% in 2011.

The  high  volatility  and  contraction  in  export  and
industrial  production  volumes  in  this year  mainly
reflected  a  sharp  fall  in  electronics  exports,  as
global  uncertainty  rose  and  demand  for  specific
high-tech  communication  devices  declined.  Re-
exports  of mineral  products  added  to  the  export
volatility.  These  two  volatile  components  aside,
export  growth  remained  positive  and  reached
11.5% y-o-y in August. The increasing importance
of Russia as a trading partner in recent months has
partly stemmed from one-off factors, e.g. re-export
of machinery  and  oil  transit.  Nevertheless,  the 
relatively  good  economic  performance  of  Russia,
along with  the  country's  recent  accession  to  the 
WTO,  is  expected  to have  a  longer-term  positive
effect  on  Estonia’s foreign  trade.  Seasonally-
adjusted manufacturing output has been improving 
steadily since  April  and  picked  up  pace  to  2% 
m-o-m  in August.  A  positive  outlook  for  export 
growth  is  also  supported  by firms’  sentiment
which is still above its long-term average.

Strong  consumption  and  public  investment
supporting growth …

With  an  improving  labour  market  situation  and
strengthening  consumer  sentiment,  retail  trade 
registered a steady growth of close to 7% y-o-y in
the  past  few months.  In  addition,  the  planned
increases in different benefits and pensions in 2013
should support the ability of poorer households’ to 
cope with high inflation and uphold consumption.

Investment activity has been very strong, with high 
public investments. This is expected to continue to
end-2012,  when  the  majority  of  projects  financed 
through  the  revenue  from the  sale  of  excess
greenhouse gas emission certificates  will be about 
to  end  and  EU  funding-related  projects  are
completed. Corporate investment is expected to be

reinforced in 2013 as export possibilities improve. 
Backed  by  low  interest  rates  and  a  recovering 
lending activity, the private-sector deleveraging  is
coming to a halt, but the high loan stock will likely
remain a drag on credit growth.

In  2013,  Estonia’s  3.1%  GDP  growth  is  expected 
to  be balanced  and  converge  to  its  long-term
average  trend  by  2014  (4%).  Based  on  the
recovery in  its main  trading  partners,  Estonia’s 
export growth is supporting domestic demand.

Graph II.6.1:Estonia - GDP growth and contributions

forecast

pps.

40

30

20

10

0

-10

-20

-30

-40

04

05

06

07

08

09

10

11

12

13

14

Exports

Dom. demand, excl. inv.

Export markets (y-o-y%)

Imports

GDP growth (y-o-y%)

… in an improving labour market … 

in 

labour 

to  changes 

force  participation 

The  unemployment 
(age  group  15-74) 
rate 
declined  rapidly  and  significantly  to  10.2%  in  the
second  quarter  of  2012  from  13.3%  one  year
earlier.  The 
ratio
remained  historically high  and  is  assumed  to 
the  age
increase  further  due 
structure. Employment has been growing rapidly at
about  3.7%  in  recent  quarters  and  is  forecast  to 
continue  growing,  mainly in  the  sectors  servicing
the  domestic  market.  However,  employment
growth appears to be temporarily slowing, feeding 
into  a  decelerating  nominal wage growth  at  5.0%
y-o-y  on  average  in  the  second  quarter  of  2012.
Wage growth is expected to remain at around 5.4%
in  2013  and  5.8%  in  2014  -  levels moderate for 
Estonia  -  with  real wage  growth  increasingly 
positive  at  1.4%  in  2013  and  2.5%  in  2014.
Vacancy rates are again high, pointing to growing 
skills mismatches and, possibly, low labour market
mobility.  The  unemployment  rate  has  already
dropped  to  the  NAWRU,  supporting  a  sizeable 
monthly  wage  increase  in  construction  in  the
second  quarter  of  2012,  but  below  productivity
growth. In  manufacturing, wage  growth outpaced
productivity growth,  reducing  thereby  companies'

61

European Economic Forecast, Autumn 2012

mark-ups,  as  output  did  not  expand.  This
phenomenon  is  expected  to  disappear  soon,  when
global demand and exports start growing again.

…with slowly declining inflation 

The  12  month-average  inflation  rate  stabilised  at
around 4.4% in early autumn as food prices started 
to  pick up  again  and  higher  energy  prices  kept
heating  and  transport  prices  up.  Inflation  in  2013
will be affected by several administrative changes:
the full opening of Estonia's electricity market and
higher  transfer  fees,  increases  by  5-6%  in  alcohol
and  tobacco  excises  and  the  introduction  of free
public  transport  in  Tallinn.  Overall,  declining
global  commodity  prices  in  2013  and  2014  is
assumed to ensure that inflation continues its slow
decline.  Finally,  as wage  growth is moderating  in
the second half of 2012 and core inflation remains 
tamed,  there  is  no  short-term  risk  of  excessive
wage inflation.

Public finances in order

With  strong  tax  revenue  collection  and  a  budget
close  to  balance  in  July,  the  fiscal  outcome  in
Estonia  has  been  better  than expected  in  the  first
half  of  this year. However,  large  scale  one-off 

Table II.6.1:
Main features of country forecast - ESTONIA
2011

investment  projects  related  to  the  sale  of  excess
greenhouse  gas  emission  certificates  should  alter
the  balance  in  the  second  half  of  the  year  and  a 
deficit  of  1.1%  of  GDP  is  expected  for  2012  as  a
whole.  This,  however,  is  considerably  better  than
the targeted deficit of 2.6% of GDP. 

After  2012,  one-off  expenditure  factors will  scale
down and the budget deficit is expected to improve
to  0.5%  of  GDP  in  2013.  The  fiscal  position  is
projected to turn into a surplus of 0.3% of GDP in
2014. The unfreezing of the public wage bill with a
planned  wage  increase  of  4.4%  for  civil  servants,
along with  a  pension  increase  of  5%  and  a  cut  in
the unemployment insurance premium by 1.2 pps.
to 3%, as stated in draft 2013 state budget, will add 
pressures to the budget balance. Local elections in 
October  2013  might  have  an  impact  on  public
expenditure.

Net  of  cyclical  factors  and  one-offs,  the  general
government  deficit  is  expected  to  reach  -0.4%  of
GDP at the end of 2012 and to revert to a surplus 
of 0.2% of GDP in 2014. The general government
debt  will  increase  over  the  forecast  horizon  from
6.1%  of  GDP  in  2011  to  11.2%  in  2014,  mostly
owing to the EFSF and ESM contributions.

Annual percentage change

bn EUR Curr. prices
16.0

% GDP
100.0

92-08
-

2009
-14.1

2010
3.3

2011
8.3

2012
2.5

2013
3.1

2014
4.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

8.2

3.1

3.5

1.6

14.6

14.0

15.1

51.1

19.5

21.7

10.2

91.5

87.6

94.7

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-14.8

-1.9

-38.3

-55.0

-20.6

-32.0

-12.4

-20.1

-2.1

9.4

-2.4

-0.8

-7.4

2.2

22.9

21.0

0.8

-3.0

4.1

2.5

3.5

1.4

25.7

102.7

23.4

25.0

8.7

7.0

2.1

0.4

-

-

-

1.8

7.0

-1.3

-3.2

-4.8

12.5

16.9

13.8

-10.0

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

11.4

-0.7

-3.8

-1.1

-1.4

-4.4

-2.0

-1.2

-2.7

-6.2

-6.8

-1.6

-0.2

-1.4

-4.2

-4.0

5.6

6.7

0.7

2.9

0.2

1.1

0.7

7.2

1.4

2.8

0.2

0.9

4.2

7.7

1.9

6.7

2.7

3.2

6.8

1.0

6.1

5.1

0.3

4.5

-

-

-

-

-

-

-

-

-

-

-

-

3.2

3.2

20.2

11.4

4.3

6.7

3.6

6.6

-2.1

-1.9

1.8

10.5

5.0

4.3

1.1

4.4

3.2

4.3

-1.2

-6.6

-0.9

2.5

-1.1

-1.4

-0.4

10.5

3.3

1.0

0.0

9.0

4.8

3.6

3.1

1.9

0.0

1.2

0.8

9.8

5.4

3.1

0.0

2.8

3.1

4.1

-0.2

-5.7

0.1

2.8

-0.5

-0.8

-0.4

11.9

3.5

0.2

7.8

13.2

6.8

6.8

4.3

3.7

0.0

0.2

1.0

9.0

5.8

2.7

-0.4

1.6

3.2

3.3

0.1

-6.0

0.4

2.6

0.3

-0.1

0.2

11.2

 Note : Contributions to GDP growth may not add up due to statistical discrepancies.

62

7. 

IRELAND 
The road to recovery is still challenging 

Global  slowdown  hits  nascent  export-led 
recovery  

The expansion of the Irish economy  moderated in 
the  first  half  of  2012  to  0.5%  compared  to  the 
same  period  in  2011,  following  real  GDP  growth 
of  1.4%  in  2011.  Net  exports  continued  to  be  the 
sole  growth  engine,  as  all  subcategories  of 
domestic demand shrunk on the back of sustained 
household  and  public  sector  deleveraging  and 
weak labour markets. More positively, the orderly 
adjustment  of  the  Irish  economy  was  recently 
rewarded  with  improved  market  sentiment  in  the 
form  of  declining  sovereign-bond  yields,  which 
enabled  the  sovereign  to  resume  debt  issuances. 
On balance, 2012 real GDP growth has thus been 
marked down only marginally to 0.4%. Weakening 
trading partner demand is expected to weigh more 
heavily on the external sector during 2013,  which 
together  with  lack  of  support  from  the  domestic 
economy  is  forecast  to  result  in  a  more  moderate 
expansion in 2013, with growth at 1.1%.  

Domestic  demand  remains  subdued  due  to 
deleveraging and fiscal consolidation  

A  further  contraction  across  all  domestic  demand 
components  is  envisioned  for  the  rest  of  2012. 
Private  consumption  and  investment  are  expected 
to  decline  at  moderating  rates  in  2013-14,  as  the 
debt  overhang  is  being  addressed  and  the  outlook 
for  the  construction  sector  remains  bleak.  While 
fiscal  multipliers  are  low  in  the  very  open  Irish 
economy, 
fiscal 
planned 
consolidation  will  subtract  from  GDP  growth 
during  the  forecast  period.  Domestic  demand  is 
expected to return to positive growth in 2014 after 
six years, led by the private sector.  

continued 

the 

External  imbalances  are  falling,  though  the 
backdrop has deteriorated 

Export growth moderated in the second quarter of 
2012 after a relatively strong expansion in the first 
quarter.  Expected  surpluses  in  both  the  services 
and  goods 
trade  balances  by  end-2012  are 
projected to outweigh a likely increase in net factor 
income outflows, and push up the current-account 
surplus  further  to  2.3%  of  GDP.  Competiveness 
indicators  are  expected  to  improve  in  2012  and 
throughout  the  forecast  period,  albeit  at  a  more 
gradual  pace  than  during  the  first  years  of  the 

crisis.  Export  demand  is  anticipated  to  be  hurt  by 
the worsening euro area and UK outlook in 2013-
14  but  helped  somewhat  by  the  relative  resilience 
of the US economy. The current-account surpluses 
are  therefore  forecast  to  continue  growing  during 
the period.  

Labour  markets  remain  weak,  moderating 
inflation  

The  labour  market  deteriorated  further  during  the 
first  half  of  2012,  with  employment  falling  by 
1.8%,  mainly  reflecting  public  sector  layoffs  and 
retirements.  Due  to  migration-driven  falls  in  the 
labour  force,  the  fall  in  employment  did  not  fully 
translate  into  increased  unemployment,  which 
increased somewhat compared to the 2011 average 
to 14.8%. Only small increases in employment are 
expected  in  2013-14  as  growth  will  be  driven  by 
relatively  capital-intensive  export  sector. 
the 
Unemployment 
to  decrease  very 
gradually  and  hence  be  increasingly  long-term  in 
nature.  HICP  inflation  surprised  on  the  upside 
during  the  first  half  of  2012  due  to  relatively 
strong 
in  energy,  administered  and 
services prices, and the end-year inflation forecast 
has been revised upwards to 2%. These effects are 
expected  to  peter  out  and  inflation  to  decline 
gradually to 1.4% in 2014.  

is  expected 

increases 

Broadly balanced macroeconomic risks  

the 

Downside  risks  stem  from  the  uncertain  external 
trading  partner  demand, 
outlook,  especially 
although 
Irish  export  sector  decoupled 
successfully  during  the  first  years  of  the  crisis. 
Expiring  patents  could  however  reduce  growth  in 
chemical  exports.  There  are  downside  risks  to 
private  consumption  from  further  falls  in  real 
estate prices, but also upside ones given substantial 
pent-up  demand  if  precautionary  savings  decline 
and  financing  conditions  ease,  facilitating  balance 
sheet repair and credit flows.  

Fiscal pressures increase 

The general government deficit-to-GDP ratio stood 
at 13.4% in 2011 (including 4.3% of GDP of one-
off  banking  support  measures).  The  2012  fiscal 
deficit  is  now  estimated  at  8.4%  of  GDP.  Central 
government  cash  data  through  September  shows 
strong  tax  revenue  performance  offsetting  some 

63 

European Economic Forecast, Autumn 2012

expenditure  overruns,  mainly  in  social  and  health
services.  While  renewed  effort  and  additional
measures should contain the slippages in the health 
sector,  some  overruns  in unemployment  benefits
and social contributions would persist. 

Graph II.7.1:Ireland - General government debt and 
deficit, one-offs and GDP growth

% of GDP

35
30
25
20
15
10
5
0
-5
-10

% of GDP

forecast

120

80

40

0

-40

05

06

07

08

09

10

11

12

13

14

General government debt (rhs)

Deficit-increasing one-off measures

Government deficit excluding one-offs

GDP growth (y-o-y%)

The  general government  deficit  is  projected  to  be
7.5%  of  GDP  in  2013  and  5%  in  2014.  This

is  on  revenue  side  and 

forecast  includes  the  planned  fiscal  adjustment  of 
3.9%  of  GDP  over  the  two  years,  of which  one-
two-thirds  on 
third 
expenditure.  Moreover, 
the  2012  expenditure
overruns  in  health sector  (0.3%  of  GDP)  will  be 
fully  corrected  by  structural  measures.  The 
structural  balance  adjustment  is  lower  than  the
nominal adjustment, due to low potential growth as
the economy undergoes structural changes. Lower
real economic growth weakens the fiscal position,
though this is somewhat offset by more favourable
price developments.

The government debt-to-GDP ratio increased from
25% in 2007 to 106% in 2011, and is seen peaking 
at around 122% in 2013 before declining. The still 
high deficit and changes to the level of government
cash  balances  are  key  inputs  to  the  gross  debt
trajectory  and  its  eventual  peak. (24)  Under  the
baseline,  the  currently  high  precautionary  cash 
balances  of  11%  of  GDP  at  end-2012  and  end-
2013 are projected to decline to 6% at end-2014.

(24)

In  2012,  one-off  financial  investments  in  the  financial
sector contribute to increase in the debt (1% of GDP).

Table II.7.1:
Main features of country forecast - IRELAND
2011

Annual percentage change

bn EUR Curr. prices
159.0

% GDP
100.0

92-08
6.2

2009
-5.5

2010
-0.8

2011
1.4

2012
0.4

2013
1.1

2014
2.2

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

77.5

29.2

16.1

5.9

166.8

131.9

128.3

48.7

18.4

10.1

3.7

104.9

82.9

80.7

Domestic demand
Inventories
Net exports

5.4

4.6

6.7

7.6

10.8

10.1

5.8

4.8

0.0

1.7

-5.7

-3.7

-27.7

-18.8

-3.8

-9.7

-9.1

-9.7

-0.6

4.1

0.5

-4.6

-22.7

-10.6

6.2

3.6

0.0

-4.3

0.6

2.9

-2.3

-4.3

-12.2

-10.5

5.1

-0.3

-2.4

-3.4

0.4

5.4

2.6

7.9

3.5

5.3

-0.9

-8.1

-3.1

-2.1

-4.2

13.7

14.4

11.9

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

106.4

-12.1

-28.9

-10.1

-13.9

-30.9

-13.4

-12.1

14.7

51.2

64.9

92.2

19.3

20.1

22.8

23.0

13.4

14.1

-4.3

-3.6

-3.4

-5.1

-6.5

-3.2

-7.9

-3.7

-1.7

-4.6

-2.2

-3.1

-9.4

-1.6

-0.1

-2.3

-0.3

-0.4

-0.2

1.0

6.3

3.0

0.5

0.1

0.7

0.2

0.2

1.2

1.0

1.1

1.1

-

-

-

-2.1

-4.0

-4.0

2.8

2.8

0.3

-2.4

-2.2

0.0

2.6

-1.2

14.8

0.7

-0.9

-2.5

17.2

1.7

2.0

0.0

23.8

2.3

2.1

-8.4

-7.7

-7.9

117.6

-0.5

-1.7

-1.5

4.8

3.2

2.0

0.3

-0.7

0.0

1.8

0.0

14.7

0.0

-1.0

-2.3

16.7

1.3

1.3

0.0

24.7

3.4

3.3

-7.5

-7.3

-7.5

1.2

-3.0

3.0

5.0

4.2

3.2

2.1

0.3

0.0

1.9

0.9

14.2

0.1

-1.1

-2.5

16.0

1.4

1.4

-0.1

25.3

4.4

4.3

-5.0

-5.3

-5.3

122.5

119.2

64

8.  GREECE 

Fiscal consolidation in the midst of internal adjustment

The grip of recession extends to 2013

shrinking 

The  provisional  national  accounts  data  release  of 
September  confirms  that  the  Greek  economy
remains  in  deep  recession.  GDP  fell  year-on-year 
by 6.3% in the second quarter which, after a fall of
6.5% in the first quarter, suggests a yearly decline
of  6.0%  in  2012  as  a  whole.  The  contraction  is
expected  to  extend  into  2013,  a  sixth  year  of
recession,  and  its main  drivers  remain  broadly
unchanged.  First,  household  disposable income
rising
keeps
unemployment and downward wage adjustment in
both  the  private  and  public  sectors.  Second,
savings measures  introduced  to  contain  the  fiscal
imbalances  reinforce  the  contraction  of  domestic
demand.  Third, 
remains
heavily subdued  due  to  restrained  access  to  credit 
and the uncertainties that remain after the political
tensions  around  the  double  elections  in  spring 
2012.  In  addition,  exports  dynamics  affected  by
weakening  external  demand  are  insufficient  to
counter recessionary pressures in Greece.  

investment  activity 

response 

to 

in 

Graph II.8.1:Greece - GDP growth and contributions, 
inflation

% of GDP

30
25
20
15
10
5
0
-5
-10

%

forecast

12
10
8
6
4
2
0
-2
-4

07

08

09

10

11

12

13

14

Dom. demand, excl. invent.

Net exports

Inventories

Inflation (rhs)

GDP (y-o-y%)

Growth recovery to surface in 2014 

The  turning  point  of  the  recession  is  expected  in 
the second half of 2013, leading to moderate GDP
growth of 0.6% in 2014. This projection relies on
the  return  of  confidence  and  investment,  boosted 
by  the  implementation  of  reforms  under  the
economic  adjustment  programme,  as well  as
progress with major  projects  co-financed  by  EU
funds.  The  drag  exerted  by  consumption,  heavily 
affected  in  2013  by  the  fiscal  consolidation,  is
projected  to  fade.  The  economic  rebound  is
expected  to  be  reinforced  by strengthening  net 
imports  and  a 
exports  driven  by subdued 

continuous improvement in the balance of trade in
services. The current-account deficit is expected to 
move closer to sustainable levels, reaching around
5% of GDP in 2014.

Graph II.8.2:Greece - Trade balance and current-
account balance

pps.

forecast

15

10

5

0

-5

-10

-15

-20

-25

-30

03

04

05

06

07

08

09

10

11

12

13

14

Current transfers

Income balance

Trade balance - services

Trade balance - goods

Current-account balance

Trade balance

rigorous 

implementation  of 

The  recovery  rests  on  the  crucial  assumption  of
timely  and 
the
adjustment  programme.  Substantial  uncertainty  is
associated  with the  forecast  with  significant risks
on  both sides  related  to the  impact  of  the
consolidation  effort  on  economic  sentiment,  the
speed  and  success  of structural  reforms,  the  pace
of  competitiveness  and  productivity gains,  the
extent  of  price  adjustment  and  its  impact  on 
disposable income, and the strength of the external
environment.

Labour  market  continues  to  undergo  painful
adjustment

The  labour  market  continues  to  suffer  from  the
prolonged  contraction 
in  economic  activity.
According  to  the  Labour  Force  Survey,  in  the
second  quarter  of  2012,  the  unemployment  rate
rose  to  over  23%  (compared with  slightly above 
16%  in the  corresponding  quarter  of  2011)  and 
employment fell to around 53% of the working age
population  (a  decrease  of  8.7%  compared  to mid-
2011).  The  labour  market  is  expected  to  bottom
out  in  2013  and  recover  only  slowly  thereafter, 
with  the unemployment  rate  at  around  22%  in
2014.  In  the  medium  term,  the  fall  in the
unemployment 
rate  should  gain momentum,
reflecting  structural  labour  market  reforms  aimed
at promoting flexible forms of employment and the
decentralisation of wage negotiations.

65

European Economic Forecast, Autumn 2012

Continued  wage  reductions  set to  eventually
be reflected in price declines  

pressure 

downward 

Extensive  labour market  reforms  and  the  severity
of the current economic contraction continue to put
significant 
on wages.
Compensation per employee  fell by 3.4% in 2011 
and  is  projected  to  fall  further,  by  6.8%  in  both 
2012 and 2013. These developments have already
contributed to a moderation in consumer prices in
the  last  two years  and  this  trend  has  continued  in
the  first  three  quarters  of  this  year.  For  2012
overall, the headline HICP inflation rate is forecast
at  around  1.1%.  In  2013  and  2014,  prices  are
forecast 
reflecting wage
developments with  some  lag.  Overall,  the  pass-
through  from wages 
is,  however,
expected  to  remain moderate.  Persistent  product
market  imperfections, but also the need to rebuild
profits  to  strengthen  the  financial  position  of
companies  and  to support  investment,  mean  that
cost-reductions  are  not 
fully  passed  on to
consumers. Administered prices and indirect taxes
(inter  alia,  on  electricity,  water  and  heating  oil
consumption) are also set to increase further.

to  prices 

actually 

fall, 

to 

the  general government  deficit 

In  2012, 
is
projected to decline to 6.8% of GDP from 9.4% of 
GDP  in  2011,  in  spite  of  the  stronger-than-
expected recession. Interest expenditure as a share
of GDP is projected to decline by 2 pps. in 2012, 
reflecting the debt relief provided in the context of 
approval of the second programme in March 2012.
The government aims to achieve a primary budget
balance in 2013. Based on the current projections, 
this  would  require  additional measures  of  around
5%  of  GDP,  which  are  being  adopted  with  the
2013  budget.  This would  reduce  the  government
deficit  to  5.5%  of GDP.  The  consolidation  effort
will  lead  to  an  improvement  in  the  structural
balance, from close to -5½% to ½% of GDP from
2011-14. Gross public debt is projected to increase
to 176.7% of GDP in 2012. This is 16 pps. higher
than  foreseen in  spring,  reflecting  revisions to 
nominal  GDP,  lower  growth  and  privatisation
proceeds  and  other  stock flow adjustments.  The 
debt ratio is projected to rise to 188.4% of GDP in
2013,  mainly  on  account  of the  sizeable  nominal
contraction of the economy and to peak in 2014 at
188.9%.  Thereafter  it  is  expected  to  fall  at  an 
accelerating  pace,  supported  by stronger  nominal
GDP growth and an improving budget balance. 

Clear progress in reducing the fiscal deficit

Table II.8.1:
Main features of country forecast - GREECE
2011

Annual percentage change

bn EUR Curr. prices
208.5

% GDP
100.0

92-08
2.9

2009
-3.1

2010
-4.9

2011
-7.1

2012
-6.0

2013
-4.2

2014
0.6

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

155.6

36.2

31.6

12.8

52.2

69.1

202.5

74.6

17.4

15.1

6.1

25.1

33.1

97.1

Domestic demand
Inventories
Net exports

3.1

2.6

4.3

9.8

6.0

6.1

2.7

3.5

-0.1

-0.6

-1.6

4.9

-13.7

-18.4

-19.4

-20.2

-2.3

-3.3

-2.9

3.1

-6.2

-8.7

-15.0

-8.2

5.2

-6.2

-5.3

-9.3

1.4

2.9

-7.7

-5.2

-19.6

-18.1

0.3

-7.3

-7.2

-10.1

0.6

2.4

3.5

5.6

7.3

9.5

9.7

1.3

-2.6

-0.6

-5.6

-2.6

17.7

12.6

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

100.0

170.6

148.3

129.7

-11.7

-12.8

-10.7

-16.1

-14.3

-14.0

-14.7

-13.3

-11.0

-15.0

-14.4

-15.6

-15.8

-5.1

-8.4

-9.4

-1.3

-2.9

-5.4

-3.5

-9.8

-8.7

-2.7

-3.4

-0.1

-1.8

-4.1

-7.0

-7.8

-6.8

-0.4

3.8

6.0

0.0

2.3

1.1

1.8

1.0

0.6

3.3

1.3

4.7

6.2

3.1

-

-

-

-

-7.7

-6.2

-14.4

-14.0

0.8

-10.0

-5.4

-9.0

-0.3

3.3

-7.9

23.6

-6.8

-8.6

-8.2

1.4

-0.5

1.1

-1.0

-12.7

-6.9

-7.2

-3.3

-3.0

2.7

-6.0

-4.7

-6.7

0.0

2.5

-2.1

24.0

-6.8

-4.7

-3.6

3.2

-1.2

-0.8

-0.7

-1.6

-3.1

5.7

6.0

4.8

-0.5

0.0

-0.8

0.0

1.5

1.4

22.2

-1.2

-0.5

-0.1

5.2

-0.4

-0.4

-0.2

-11.5

-10.8

-8.3

-6.1

-6.8

-1.2

-1.5

-6.3

-3.9

-5.5

0.7

0.7

-5.2

-2.7

-4.6

0.4

0.4

176.7

188.4

188.9

66

9.  SPAIN

Deep adjustment continues

Rebalancing 
recession 

is  underway 

in  the  midst  of

The  adjustment  of  the  large  external  and  internal
imbalances built up in the years prior to the crisis
is holding back economic growth in Spain and has
led to very high unemployment. The sizeable stock 
of  private  sector  debt  is  prompting  deleveraging 
among households and non-financial corporations. 
It also implies a profound shift in the composition
of  GDP  growth  away  from  domestic  demand. 
Unemployment  remains  stuck  at  very  elevated
levels  and  is  set  to  increase  further.  Public 
finances, which suffered a significant deterioration
in the wake of the crisis, need to be brought back
fiscal
sustainable  path.  Ambitious
onto  a 
consolidation  plans  are  being  put  in  place  but  are 
weighing  on  the  short-term growth  outlook.  The
correction of these imbalances will affect domestic
the  forecast  horizon, 
demand  adversely  over 
although  a  gradual  improvement  is  expected  in
2014,  under  a  no-policy-change  assumption.
Resilient exports should continue to provide some
cushion to otherwise very weak economic growth.

Real GDP is expected to contract by around 1½%
both  in  2012  and  2013.  Spain  entered  its  second
recession  since  2009-10  in  the  fourth  quarter  of 
2011. Growth is expected to remain negative well
into  2013.  The  main factors behind  the  expected
contraction 
in  2012-13
in  economic  activity 
include  further  deterioration  in  the  labour  market, 
fiscal
deleveraging  of 
consolidation,  and  tight  credit  conditions  –  all  set
in the context of the ongoing crisis in the euro area 
and somewhat weaker external demand.

the  private 

sector, 

(EFSF). 

Recurrent problems in some of the Spanish banks,
struggling  to  deal  with  a  large  stock  of  impaired
real  estate  related  assets,  eventually led 
the
Spanish government to apply for external financial
assistance  for  the  recapitalisation  of
financial
institutions from  the  European  Financial  Stability
Facility 
of
Understanding (MoU) was signed on 23 July and it
was  agreed  that  up  to  EUR  100  billion will  be
made  available  by  the  EFSF for  restructuring  and 
recapitalisation of Spanish banks. This programme
is  expected  to  have  a  positive  impact  on  the
stability of the financial sector in Spain. However, 
in  the  short  term,  the  necessary  adjustment  in
credit  growth following  the  boom  and  bust  of the

The  Memorandum 

construction  and  real  estate  sector  is  expected  to
keep credit flows to the real economy constrained, 
contributing 
private
consumption and investment.

the weakness 

of 

to 

Pressures  on  the  sovereign have  abated  recently 
due,  to  a  large  extent,  to the  OMT  (Outright
Monetary  Transactions)  announced  by  the  ECB.
However,  uncertainty 
remains  elevated  and 
financing  conditions  are  subject  to  considerable 
strain.  In  parallel  to  fiscal  consolidation,  the
a
Spanish 
comprehensive  programme  of  structural  reforms,
which includes an ambitious labour market reform
that was adopted in February and slightly modified 
in  July  2012.  An  additional  structural  reform
package was announced in September 2012.

implementing 

authorities 

are 

Graph II.9.1:Spain - Contributions to growth

pps.

forecast

8

6

4

2

0

-2

-4

-6

-8

06Q1 07Q1 08Q1 09Q1 10Q1 11Q1 12Q1 13Q1 14Q1

Domestic demand

Net exports

Inventories

GDP (y-o-y%)

Domestic demand remains subdued

to  a 

Private  consumption  is  set  to  act  as  a  drag  on 
growth  over  the  forecast  horizon,  with  some
positive  growth  expected  only  in  2014.  In  2012,
private  consumption will  be particularly subdued
due 
to  record  high  unemployment,  ongoing 
household  deleveraging  and  the  binding  credit
constraint. Households' disposable income is set to
in the
decline  significantly  due
compensation  of  employees  and  an  increase  in
income taxes. In addition, households' wealth will
be reduced given an expected further fall in house
prices.  These  trends will  be  further  magnified  by
higher  inflation,  reducing  real  disposable  income
in  2012  and  2013.  The  saving  rate  is  expected  to
decrease  to  less  than  9%  - a  level  that  is well
the  historical  average  of  11% -  as
below 
households  try  to  smooth  their  consumption  and
their  ability  to save  is  constrained  by falling
income levels.  

fall 

67

European Economic Forecast, Autumn 2012 

the  potential 

for  accelerating 

Investment,  particularly  investment  in  equipment, 
is  set  to  decline  given  the  unfavourable  economic 
indebtedness,  excess 
outlook,  high  corporate 
capacity  and  difficult  access  to  credit.  Business 
confidence  in  industry  is  very  low  and  the  main 
component  of  overall  investment  continues  to  be 
replacement investment. All in all, corporations are 
expected to increase their net lending position, also 
on  the  back  of  improving  profitability,  thus 
increasing 
the 
reduction  in  accumulated  debt.  The  adjustment  in 
the housing market is still ongoing, with the fall in 
house prices accelerating in 2012. The cumulative 
fall  in  house  prices  has  reached  28%  in  nominal 
terms  and  36%  in  real  terms  since  the  peak  in 
2007.  Further  adjustment  is  expected  given  the 
remaining  large  stock  of  unsold  houses.  Non-
residential  construction  is  expected  to  decline, 
driven  mostly  by  fiscal  consolidation  and,  to  a 
lesser  extent,  by  lower  corporate  investment. 
Public  consumption  is  also  projected  to  fall, 
reflecting  the  impact  of  fiscal  consolidation  at  all 
levels of government.  

Net exports continue to support growth 

the  forecast  horizon.  This 

Export  growth  is  expected  to  remain  robust  over 
the forecast horizon and should gather pace after a 
somewhat  weaker  2012.  Declining  unit  labour 
costs  (ULC)  and  improving  product  and  regional 
diversification  have  allowed  Spain  to  increase  its 
export  market  share  –  a  trend  that  is  expected  to 
continue  over 
is 
important to achieve a further reduction in the high 
external deficit. As a result of  very weak imports, 
which  are  due  to  subdued  domestic  demand,  and 
relatively  resilient  exports,  Spain's  trade  balance 
has  significantly  improved  and  is  expected  to 
record a surplus in 2012. These trends have led to 
an  accelerated  correction  in  the  current-account 
deficit, which is expected to be in balance by 2013. 
However,  the  high  dependence  of  the  Spanish 
economy  on  energy  imports  and  the  high  and 
increasing 
the 
interest  burden  may  constrain 
necessary improvement of the current account. 

Employment getting worse before it gets better 

The  labour  market  situation  deteriorated  further 
and  the  unemployment  rate  reached  24.6%  in  the 
second  quarter  of  2012.  The  recent  labour  market 
reform  allows  firms  greater  flexibility  to  adjust 
wages and employment (including working hours) 
to  their  specific  economic  situation.  However, 
the  Spanish 
given 

the  current  weakness  of 

68 

economy and a relatively short time span since its 
entry into force, it may take some time before the 
first  positive  effects  become  manifest.  So  far,  the 
adjustment in employment continues to take place 
through  the  reduction  in  the  number  of  workers 
rather  than  a  reduction  in  working  hours.  Unlike 
before,  permanent  employment  is  now  being 
affected  as  much  as  temporary  employment.  The 
rise  in  unemployment  affects  all  branches  of 
activity.  Moreover,  the  duration  of  the  crisis  has 
led  to  an  increase  in  long-term  unemployment.  In 
the  second  quarter  of  2012,  it  reached  more  than 
50% of total unemployment, twice its 2008 level.  

Wage  growth  moderates  while  inflation  picks 
up 

In spite of the  weakness of  the Spanish economy, 
reached  3.5% 
inflation  accelerated  and 
in 
this  acceleration  was 
September.  However, 
predominantly  driven  by  exogenous 
factors: 
energy prices pushed up by hikes in oil prices and 
discretionary measures, such as the increases in co-
payments for medicines, higher VAT rates, higher 
university tuition fees and an increase in electricity 
and  gas  prices.  The  effects  of  these  discretionary 
measures are expected to be visible in year-on-year 
growth rates of prices until the last quarter of 2013. 
Wage  growth  is  expected  to  be  much  more 
moderate  than  in  the  past,  reflecting  a  positive 
impact of the recent labour market reform, paving 
the  way  to  a  faster  recovery  in  employment.  The 
combination  of  moderate  wage  growth  and 
sustained 
is 
expected  to  reduce  real  ULCs  over  the  forecast 
horizon,  enabling  Spain  to  regain  some  of  its  lost 
competitiveness.  

in  productivity 

improvements 

Fiscal  consolidation  to  intensify  in  second  half 
of 2012 

Fiscal  consolidation  hardly  advanced  in  the  first 
eight  months  of  2012.  Planned  expenditure  cuts 
seem  to  be  on  track,  but  broad-based  revenue 
shortfalls,  higher  interest  payments  and  rising 
social  transfers  almost  offset  these  improvements. 
Following  further  fiscal  consolidation  measures 
presented  in  July,  including  an  increase  in  VAT, 
the elimination of the 2012 Christmas bonus in the 
public sector and some  measures on the corporate 
tax  side  at  the  central  level,  there  should  be 
significant  fiscal  tightening  in  the  second  half  of 
the  year.  This  is  also  likely  to  be  the  case  at 
regional government level, where expenditure cuts 
in  education  are  expected  to  kick  in.  For  the  year 

Member States, Spain 

6.4%  of  GDP,  due  to  the  expiry  of  some  of  the
measures introduced in 2012. 

from 

environment 

lending  stems 

Over 2011-14, virtually all of the improvement in
government  net
lower
expenditure,  with  the  effect  of  discretionary  tax 
hikes  just  offsetting  revenue  losses  due  to  the
recessionary 
the  ongoing
structural shift away from a tax-rich growth pattern
based on domestic demand. Overall, risks are tilted
to the downside. In addition to yet uncertain exact
amount  of  bank  recapitalisation,  the  less  tax-rich
growth  composition  could lead  to  lower-than-
expected revenues. 

and 

The structural balance is expected to improve from
-6¼%  of  GDP  in  2012  to  -4%  of  GDP  in  2013, 
before  deteriorating  again  in  2014  to  -5¼%  of
GDP.  Large  public  deficits,  negative  or  low
nominal  GDP  growth  and  high  interest  rates  on
government  borrowing  are  likely  to  result  in  the
government gross debt rising from 69.3% of GDP
in 2011 to  more than 97% of GDP in 2014. One-
off  effects  of  the  payment  of  arrears  to  suppliers
and  a  contribution to  EFSF/ESM  funds  add  to  an
increase in general government debt in 2012.

as  a  whole,  the  general  government  deficit  is
therefore expected to narrow to about 8% of GDP,
or about 7% of GDP – whereby 1% is entirely due
to bank recapitalisation.

In 2013, the general government deficit is expected 
to  narrow  further,  thanks  to  further  discretionary
measures more  than  offsetting  the  impact  of the
continued recession. The July 2012 fiscal package
contained some elements that are expected to have
their major impact in 2013, such as the VAT hike.
The  2013  Budget  Bill  presented  to  parliament  in
further 
September 
consolidation 
contained 
measures,  mainly  on 
the  expenditure  side. 
Together with consolidation efforts at regional and
local levels announced in the 2013-14 budget plan 
presented  in  August,  these  measures  are  expected
to generate a  net  fiscal consolidation of about 1%
of  GDP.  Thus,  the  general  government  deficit  is
forecast  to  reach  around  6%  of  GDP  in  2013.  In
2014, 
the  measures 
introduced in 2012, such as the income tax hike, is
roughly  offsetting 
the  planned  consolidation 
included  in  the  2013-14  budget  plan.  Despite  the
fact  that  output  and  employment  is  expected  to
return to positive, albeit weak, growth, the general 
government  deficit  is  expected to deteriorate to 

the  expiry  of

some  of 

Table II.9.1:
Main features of country forecast - SPAIN

2011

Annual percentage change

bn EUR Curr. prices
1063.4

% GDP
100.0

92-08
3.0

2009
-3.7

2010
-0.3

2011
0.4

2012
-1.4

2013
-1.4

2014
0.8

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

620.0

222.7

224.0

63.0

321.8

330.3

1041.9

58.3

20.9

21.1

5.9

30.3

31.1

98.0

Domestic demand
Inventories
Net exports

2.8

3.9

3.7

4.2

7.1

7.5

2.8

3.3

0.0

-0.3

-3.8

3.7

-18.0

-24.5

-10.0

-17.2

-3.0

-6.6

0.0

2.9

0.7

1.5

-6.2

3.0

11.3

9.2

0.3

-0.8

0.1

0.3

-1.0

-0.5

-5.3

2.4

7.6

-0.9

-0.3

-1.8

-0.1

2.3

3.4

0.0

4.4

2.1

4.2

-2.3

-6.5

-1.7

21.7

20.1

18.0

13.9

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-11.2

17.8

69.3

53.4

53.9

61.5

13.1

11.0

-9.4

-9.7

-2.4

-2.4

-7.5

-0.2

-8.7

-7.6

-4.0

-4.6

-5.2

-4.0

-3.8

-9.4

-4.3

-3.8

-3.7

-7.6

-3.2

-3.2

-4.8

-7.6

-4.4

-2.3

-1.4

-3.3

-2.0

-2.2

-2.3

-0.5

1.4

3.8

0.4

0.1

0.7

1.0

2.0

3.1

0.2

1.5

4.5

-

-

-

-1.9

-4.9

-9.0

-6.6

2.1

-6.3

-2.0

-4.0

0.0

2.6

-4.5

25.1

0.4

-2.7

-2.9

8.7

0.2

2.5

-2.7

-2.5

-2.4

-1.9

-8.0

-6.0

-6.3

86.1

-2.1

-7.2

-5.6

-3.5

4.2

-3.2

-1.8

-3.8

0.0

2.3

-2.7

26.6

1.4

0.1

-1.7

8.1

1.9

2.1

-0.2

-0.8

-0.5

0.0

-6.0

-4.0

-4.0

92.7

0.0

-1.4

-0.3

0.8

5.7

2.4

0.7

-0.3

0.0

1.2

0.2

26.1

0.4

-0.2

-1.6

9.1

1.4

1.3

-0.2

0.0

0.4

0.9

-6.4

-5.3

-5.3

97.1

69

10.  FRANCE 

One more year of flat growth before recovery 

to 

is  projected 

sovereign-debt 

Activity  is  set  to  gradually gain  momentum in
2014.  Confidence 
improve
gradually  in  line with  the  expected  fading  of  the
some
crisis 
euro-area 
improvement 
in the  country's  fiscal  position.
Households  are  set  to  reduce  their  relatively high
savings,  private  companies  are 
to 
accelerate  their  investment spending,  and  external
demand  is foreseen  to strengthen.  GDP  growth is
therefore  projected  to  increase  to  1.2%  in  2014, 
slightly above potential growth.  

forecast 

and 

Persistent rise in unemployment

Employment decelerated sharply in the first half of 
2012. The  unemployment  rate  reached  10.3%  in
the  second  quarter,  against  9.6%  one  year  before. 
In  the  current  context  of stagnating  economic
activity  and  rigid  nominal wages,  employers  are
likely  to focus  on  restoring  productivity,  to  the
detriment  of  job  creation.  As  a  consequence,
unemployment  is  expected  to  continue  to  rise  to
10.7% in 2013 and to stabilise at this level in 2014. 

Unemployment  and  tax  rises  to  hold  back
private consumption and recovery in 2013 

New taxes  introduced  by the  government  in  its
2013  budget  have  been  targeted  towards high- 
income  households,  with  a  specific  focus  on  the
10th decile of the income distribution, which has a
lower  propensity  to  consume.  The  impact  on 
consumption is therefore expected to be lower than
would be the case with a broad-based tax increase.
However,  persistently  rising  unemployment  is
likely to weigh on consumption.  

To 
smoothen  consumption,  households  are 
expected to decrease their saving rate in 2012 and 
2013.  Some  positive  developments  can  also  be 
expected from the foreseen decline in inflation that
would mitigate  losses  in  real  income.  All  in  all,
household consumption is projected to stagnate in
2012  and  to  decrease  by 0.1%  in  2013.  The 
stabilisation  of  the  labour  market,  together  with  a
further reduction in the saving rate, is projected to
lead  to  an  acceleration  of  private  consumption  in
2014.

Deteriorated  expectations 
recovery

jeopardize 

the 

The  French  economy  has  slowed  down  amid  the
economic contraction in the euro area in 2012, but
has  fared  better  than many  of  its  European  peers 
thanks to relatively resilient domestic demand and
in  spite  of  disappointing  exports.  However,  after
three  quarters  of stagnating GDP  and  historically
low  levels  of  corporate  profitability,  prospects  for 
an imminent recovery have waned. Entrepreneurs,
whose  confidence  has  suffered,  are  expected  to
scale down their investment and employment plans 
in  the  short  term.  Deteriorations  in  the  business
climate  and  in  the  labour  market  point  towards  a
persistent  stagnation  or  small  contraction  of 
activity  in  the  second  semester  of  2012.  Private 
consumption is not expected again to play its usual
role  as  the  main  driver  of growth,  although  it
remains  stable  enough  to  prevent  a  contraction  in
GDP  for  the  year  as  a whole.  Overall,  with  0.2%
annual GDP growth in 2012, the French economy
is forecast to remain anaemic.

The recovery is expected to be slow in 2013, with
a  modest
increase  in  GDP of  0.4%.  Firms  are
forecast  to  limit  employment  creation  in  order  to
maintain 
their  profitability  and  productivity.
Unemployment and tax rises are likely to weigh on
households’  purchasing  power  and  will  keep
confidence low. As a result, private consumption is
expected to decrease while the still dynamic public
consumption is set to contribute positively to GDP
growth.

Graph II.10.1:France - GDP growth and contributions

forecast

pps. 

5

4

3

2

1

0

-1

-2

-3

-4

-5

04

05

06

07

08

09

10

11

12

13

14

Inventories

Net exports

Domestic demand (excl. Inv.)

GDP growth (y-o-y%)

70

No pick up in investment in the medium term 

Downward risks prevail 

Member States, France 

Although  credit  conditions  appear 
relatively 
favourable,  the  conditions  for  a  rapid  pick-up  in 
investment  do  not  yet  seem  to  be  met.  Three 
quarters of flat economic growth and the enduring 
deterioration in the profit margins of non-financial 
companies, which reached a low point in 2011, are 
likely  to  have  significantly  dented  entrepreneurs’ 
confidence  and  expectations.  Weak  demand,  both 
from domestic and foreign agents, will continue to 
restoring 
prevent 
investment in 2012 as well as 2013. 

significantly 

firms 

from 

Increasing confidence of firms is projected to start 
to  drive  a  gradual  recovery  from  the  second 
semester  2013  onwards.  A  modest  virtuous  cycle 
would be engaged in 2014, with gradual increases 
in aggregate demand resulting in a partial catch-up 
in investment. After the slight restocking observed 
in the  first semester 2012, the level of inventories 
should stabilise over the forecast horizon.  

External trade driven by a slowdown in imports 

The development of French exports is expected to 
remain  somewhat  weaker  than  contained  world 
demand  as  the  persistent  deterioration  in  external 
competitiveness observed over the last ten years is 
not  likely  to  be  reversed  in  the  medium  term. 
French companies are set to continue to lose export 
market shares.  

to 

lead 

In  spite  of  the  weakness  of  external  demand,  the 
deceleration  of  imports  in  2012  and  2013  is 
expected 
to  a  significant  positive 
contribution of net exports to GDP growth (0.4 and 
0.3  pp.  in  2012  and  2013  respectively).  In  2014, 
the  external  contribution  to  growth  is  expected  to 
drop  to  zero,  in  line  with  a  gradual  economic 
recovery and the concomitant increase in imports.  

Decreasing inflationary pressures  

Past increases in energy prices have contributed to 
maintaining  a  relatively  high  level  of  inflation  in 
the first semester of 2012 despite the slowdown of 
economic  activity.  In  the  second  semester,  oil 
prices  are  assumed  to  stabilise  and  inflation  to  be 
unchanged at 2.3%. In 2013 and 2014, the inflation 
rate is expected to decrease to 1.7% for both years 
on  the  back  of  high  unemployment  and  weak 
economic growth.  

Beyond  the  risks  associated  with  the  general 
economic  environment,  specific  downward  risks 
relating  to  the  French  economy  weigh  on  the 
potential recovery.  

Although  a  number  of  uncertainties  related  to  the 
financial  sector  have  been  lifted,  the  impact  of 
stronger capital requirements  of banks could  have 
a  stronger-than-expected  adverse  impact  on  new 
lending.  Constrained  credit  growth  could  limit 
investment  and  the  pace  of  recovery.  Finally,  less 
dynamic 
if 
cannot 
competitiveness  deteriorates  even  more 
than 
currently expected. 

excluded 

exports 

be 

Fiscal challenges still remain 

In  2012,  the  general  government  deficit  is  set  to 
reach 4.5% of GDP, in line with the official target 
(revised  from  4.4%  in  the  stability  programme) 
and  down  from  5.2%  last  year.  The  authorities 
secured  this  by  adopting  additional  consolidation 
measures  in  July  to  compensate  for  worsening 
growth  and  lower-than-expected  tax  elasticities. 
Together  with  previously  adopted  measures,  the 
effort  on  the  revenue  side  now  represents  around 
1%  of  GDP,  partly  offset  by  weak  economic 
growth.  The  rise  in  expenditure  is  projected  to 
remain  below  historical 
levels,  with  central 
government spending decreasing in real terms and 
an  only  subdued  rise  in  social  benefits.  Savings 
come  from  cuts  in  the  wage  bill  (freezing  base 
wages,  replacing  only  half  of  retiring  central 
government  civil  servants),  a  freeze  on  transfers 
from  central  government  to  local  authorities,  an 
only partial indexation of some social benefits (e.g. 
family  and  housing),  and  a  tighter  healthcare 
spending  norm.  Furthermore,  the  2010  pension 
reform,  which  included  a  gradual  increase  of  the 
minimum retirement age from 60 to 62 and the full 
pension age from 65 to 67, is gaining momentum. 

In 2013, the deficit is set to further decrease on the 
back  of  the  measures  already  adopted  and  those 
presented in the draft budget which aims at 3% of 
GDP.  Additional  revenues  (1.4%  of  GDP)  are 
planned  to  be  mainly  raised  by  increasing  the 
personal  income  tax  on  high  incomes,  reducing 
corporate  income  tax  credits,  increasing  donation 
and  inheritance  taxes,  abolishing  tax  and  social 
security exemptions on overtime, increasing social 
levies on employee savings schemes as well as on 
capital  income  and  gains,  and  creating  a  dividend 
tax. Current expenditure rules (central government 

71 

European Economic Forecast, Autumn 2012

renewed  and 

and  healthcare)  are 
this will
contribute to maintaining an only subdued increase
in spending. On the other hand, the fact that GDP
will  again grow  significantly  below  its  potential 
will have a negative impact on the headline deficit.
Overall,  the  deficit  is  expected  to  reach  3½%  of 
GDP  in  2013.  The  difference  with  the  official
target
divergent 
stems 
macroeconomic  scenarios, the one  underlying this
forecast  being  less  benign.  A  somewhat  lower
impact  of  revenue  measures  compared  with  the
official  estimates, notably  concerning  the fight
against tax evasion and the reduction of corporate
income tax  credits,  and  slightly more  dynamic
public expenditure also play a role.

mainly 

from 

Under the usual no-policy-change assumption, the
deficit  is forecast  to  remain unchanged  in  2014.
The  tax  burden  is  expected  to  stabilise,  while
public  expenditure  is  set  to  accelerate  somewhat,
notably with
savings
remaining to be specified.

healthcare 

spending 

Positive risks to this scenario mainly relate to this
year's budgetary outcome that might turn out better 
than  currently targeted.  Indeed,  whereas  a  full
execution has  been  assumed  in  this  forecast,  the
deficit targets were overachieved both in 2010 and 
2011 (whereas there were slippages in the previous
years  at  the  level  of general government).  On  the
negative  side,  a  comparatively  low tax  content  of
economic  activity  and  a  higher  than  currently
expected  negative  impact  of some  court  decisions
cannot be fully ruled out at this stage. 

The debt ratio, which will reach 90% by the end of
2012,  is  expected  to  continue  to  rise  over  the
forecast horizon on the back of still high expected
deficits. The public loan launched in 2010 (the so-
called  "investissements  d'avenir"  programme,
notably  consisting  in  public  investment)  is  set  to
have only a marginal impact.  

Overall,  this  implies  a  cumulated  improvement  in
the  structural  balance  of  around  2½%  of GDP  in 
2012-13,  followed  by  a  marginal  deterioration  in
2014.

Table II.10.1:
Main features of country forecast - FRANCE
2011

Annual percentage change

bn EUR Curr. prices
1996.6

% GDP
100.0

92-08
1.8

2009
-3.1

2010
1.7

2011
1.7

2012
0.2

 GDP 
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

1151.3

489.3

401.2

99.7

538.2

594.3

57.7

24.5

20.1

5.0

27.0

29.8

2034.2

101.9

Domestic demand
Inventories
Net exports

1.8

1.5

2.3

3.5

4.7

4.9

2.0

1.8

0.1

0.0

0.3

2.5

-10.6

-9.6

-12.1

-9.6

-3.1

-1.5

-1.2

-0.5

1.5

1.8

1.2

4.1

9.6

8.9

1.7

1.6

0.1

0.0

0.3

0.2

3.5

3.5

5.3

4.9

1.7

0.9

0.8

0.0

9.6

0.5

2.6

2.0

9.7

9.5

1.4

9.6

0.7

2.6

-0.3

-1.5

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

79.2

16.1

58.3

14.9

82.3

86.0

15.6

15.7

-4.5

-2.2

-2.4

-0.4

-6.1

-5.7

-2.2

-2.5

-3.5

-1.8

-2.0

-1.7

-1.9

-2.6

-0.1

-2.6

-0.2

-3.4

-3.8

-7.5

-7.1

-5.2

-6.1

-5.9

-4.3

0.1

0.6

0.5

0.3

1.7

1.8

1.1

0.1

1.7

3.3

3.7

0.6

3.0

0.7

1.3

2.3

2.8

1.6

-

72

2013
0.4

-0.1

1.1

0.1

0.1

2.1

0.9

0.5

0.2

-0.2

0.3

0.0

10.7

1.8

1.4

-0.1

15.4

1.5

1.7

-0.5

-3.1

-1.8

-1.6

-3.5

-2.0

-2.0

92.7

2014
1.2

1.1

1.3

1.7

4.2

4.2

4.0

1.3

1.3

0.0

0.0

0.6

10.7

1.7

1.1

-0.5

15.3

1.7

1.7

-0.7

-3.4

-1.9

-1.6

-3.5

-2.2

-2.1

93.8

0.0

1.3

0.3

-2.2

2.6

0.8

0.2

0.4

-0.6

0.5

-0.1

10.2

2.0

1.6

0.0

15.5

1.7

2.3

-0.1

-3.3

-2.2

-1.9

-4.5

-3.3

-3.4

90.0

11.  ITALY 

Uncertainty and tight financing conditions delay recovery 

A deep recession in 2012… 

current-account deficit is forecast to narrow to less 
than ½% of GDP over 2013-14.  

in 

In  2012,  the  Italian  economy  is  expected  to 
contract  by  2.3%  on  the  back  of  a  sharp  fall  in 
domestic  demand,  especially 
investment. 
Uncertainty in financial markets remains elevated, 
continuing  to  affect  economic  agents'  confidence 
and  their  investment  and  spending  decisions. 
Furthermore,  the  protracted  euro-area  sovereign-
debt crisis has exerted significant upward pressure 
on  interest  rates.  In  the  context  of  a  fragmented 
financial  sector  across  national  borders,  this  has 
fed  into  funding  pressures  in  the  banking  sector 
and  tighter  financing  conditions  for  the  private 
sector.  In  turn,  credit  tightening  may  amplify  the 
fiscal 
dampening 
consolidation  on  domestic  demand.  Finally,  the 
deteriorated  external  economic  environment  has 
tapered the expansion of exports, even though the 
trade balance is set to return to positive territory in 
2012 as imports decline significantly.  

impact  of 

sizeable 

the 

…followed by a tepid recovery  

in 

line  with 

financial  market  conditions  and 

Under  the  assumption  of  a  gradual  normalisation 
of 
reduced 
uncertainty,  the  pace  of  contraction  of  economic 
activity  is  set  to  decelerate  in  the  second  half  of 
2012,  following  two  consecutive  quarters  of  real 
GDP  growth  at  -0.8%.  Economic  activity  is 
expected to start growing again as from the second 
half of 2013, but at a very subdued pace. For 2013 
as  a  whole,  private  consumption  is  set  to  contract 
further  and  return  into  positive  territory  only  in 
income 
2014, 
developments. 
is 
expected to recover faster, as financing conditions 
and  confidence  improve,  while  the  correction  in 
the construction sector is forecast to continue into 
2014.  The  expected  acceleration  in  Italy's  export 
markets and the euro depreciation that occurred in 
2012  are  set  to  lead  to  stronger  export  growth  in 
2013, in particular towards non-EU trade partners. 
Depressed  domestic  demand  would  continue 
curbing  imports  in  2013,  while  in  2014  their 
rebound  is  expected  to  outpace  growth  of  exports 
due  to  the  recovery  in  domestic  demand,  in 
particular for investment in equipment.  

real  disposable 
in 

Investment 

equipment 

Overall, the trade balance is set to remain positive, 
also  thanks  to  the  assumed  reduction  in  oil  prices 
over  the  whole  forecast  horizon.  Therefore,  the 

Graph II.11.1:Italy - Determinants of the current-
account position

% of GDP

forecast

4

3

2

1

0

-1

-2

-3

-4

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Balance of current transfers
Balance of primary income
Balance of goods and services
Current-account balance

Higher unemployment and wage moderation 

the  back  of 

the  ongoing  recession, 

On 
the 
unemployment rate is expected to increase by over 
2 pps., entering double-digit territory, in 2012, and 
by  another  percentage  point  over  2013-14.  This 
trend  continues 
to  be  mainly  driven  by  an 
expanding labour force. Two major factors can be 
held  to  explain  the  significant  increase  in  labour 
market  participation  since  mid-2011.  On  the  one 
hand,  more  individuals,  in  particular  women  and 
young people, are now impelled to look for jobs as 
households'  disposable  income  falls.  On  the  other 
hand,  the  recently  adopted  pension  reforms  are 
pushing  older  workers  to  remain  in  the  labour 
market.  Moreover,  after  increasing  slightly  in 
2011,  headcount  employment 
to 
decline  in  2012  and  2013,  even  though  job  losses 
in 2012 are held back by some labour hoarding by 
firms.  

is  expected 

equivalent 

Hours  worked  are  projected  to  fall  significantly 
more  in  2012-13,  and  recover  relatively  faster  in 
2014, owing to the firms' increased use, during the 
recession,  of  the  wage  supplementation  scheme 
and  part-time  work.  When  measured  in  terms  of 
labour 
full-time 
productivity  is  projected  to  fall  in  2012,  and  start 
increasing again, but only moderately, in 2013-14. 
Wages  in  the  private  sector  are  expected  to  grow 
below  inflation  over  the  forecast  horizon,  while 
public  sector  wages  continue  to  be  frozen.  As  a 
result,  nominal  unit  labour  costs  are  forecast  to 
accelerate  in  2012,  increasing  by  more  than  2%, 

employment, 

73 

European Economic Forecast, Autumn 2012 

before  slowing  down  below  1%  over  2013-14. 
Taken  together  with  the  depreciation  of  the 
nominal  effective  exchange  rate  in  2012,  Italy  is 
expected  to  recover  some  cost  competitiveness 
over the forecast horizon, in particular vis-à-vis its 
non-EU trade partners. 

transfer  expenditure.  On  the  capital  side,  direct 
investment  and  transfers  are  both  expected  to 
contract  significantly,  but  the  reduction  in  total 
capital expenditure is tempered by the proceeds of 
the sale of broadband licences, which are recorded 
as negative capital asset sales in 2011.  

Indirect  taxes  and  oil  prices  shape  inflation 
developments 

Annual  HICP  inflation  remained  above  3%  in  the 
first three quarters of 2012 due to higher oil prices 
and  the  increases  in  excise  duties  on  fuel  and  the 
standard  VAT  rate  that  were  enacted  in  2011. 
Annual  inflation  is  expected  to  ease  at  the  end  of 
2012,  thanks  to  the  favourable  base  effect.  A 
further  1 pp.  increase  in  the  standard  and  reduced 
VAT  rates  scheduled  for  July  2013  will  push 
prices  up  again  in  the  third  quarter  of  2013. 
Inflation  is  expected  to  go  well  below  2%  in  the 
second half of 2014 due to the assumed decline in 
oil prices and reduced pressure from labour costs.   

Fiscal consolidation continues only until 2013 

Despite the sharp economic downturn, the general 
government deficit is projected to narrow to 2.9% 
of GDP in 2012, from 3.9% in 2011, and to 2.1% 
in  both  2013  and  2014.  The  projected  increase  in 
interest  expenditure  over 
the  forecast  period 
reflects  the  sharp  increase  in  the  sovereign-risk 
premium in the second half of 2011, as well as an 
increasing debt. It implies that the primary surplus 
improves  more  significantly 
the  overall 
general  government  balance,  on  the  back  of  the 
sizeable  consolidation  measures  adopted  in  2010 
and  2011:  from  1%  of  GDP  in  2011,  the  primary 
surplus is set to reach 3.7% in 2014.  

than 

In  2012,  total  primary  expenditure  is  expected  to 
decline slightly year-on-year (for the third year in a 
row)  thanks  to  the  expenditure  saving  measures 
adopted  since  May  2010,  including  in  the  context 
of  the  spending  review  in  the  summer  2012.  The 
public  sector  wage  bill  has  been  significantly 
restrained  through  a  4-year  freeze  in  wages  and  a 
quasi-total  suspension  of  new  hires.  In  addition, 
intermediate  consumption  has  been  cut  at  both 
levels.  Social 
local  government 
central  and 
transfers  are  projected  to  increase  only  mildly: 
while  the  number  of  pensioners  continues  to  rise, 
the  pace  of  increase  is  set  to  continue  declining 
reforms. 
enacted 
thanks 
De-indexation  of  higher  pensions  in  2012  and 
2013  also  contributes  to  the  moderation  of  social 

pension 

the 

to 

to 

revenues 

projected 

Despite the expected large contraction in domestic 
demand, 
rise 
are 
substantially as a share of GDP in 2012, by 2 pps. 
from  2011,  thanks  to  the  adopted  discretionary 
measures.  The  increase  in  the  standard  VAT  rate 
(from  20%  to  21%),  in  excise  duties  on  fuel  and 
especially in taxation on property enacted in 2011 
are  anticipated  to  more  than  offset  the  fall  in  tax 
revenues  entailed  by  both  the  negative  income 
dynamics  and  the  large  fall  in  consumption, 
notably  of  tax-rich  durable  goods.  At  the  same 
time, the expiry of one-off taxes in 2012 is bound 
to  reduce  the  capital  revenue  intake  relative  to 
2011.  

The  structural  adjustment  in  2012  is  estimated  at 
nearly 2¼ pps. of GDP for the overall balance and 
around 2¾ pps. for the primary balance.  

6

4

2

0

-2

-4

Graph II.11.2:Italy - General government structural 
balances

% of GDP

forecast

07

08

09

10

11

12

13

14

Structural balance

Structural primary balance

the 

incorporates 

In  2013-14, 
the 
forecast 
expenditure  savings  enacted  in  the  summer  2012 
and  with  the  3-year  draft  budget  law  (Legge  di 
Stabilità  2013-15)  adopted  by  the  government  in 
October.  These  savings  are  also  intended  to 
finance  part  of  the  repeal  of  the  VAT  rates' 
increase  legislated  in  December  2011.  Current 
primary  expenditure  is  projected  to  rise  only 
marginally  in  nominal  terms  in  2013,  but  to 
resume growing at a faster pace in 2014 as the de-
indexation  of  higher  pensions  expires.  Capital 
spending is set to continue falling in 2013 and then 
recover slightly in 2014. Total primary expenditure 
in nominal terms is thus expected to decline for the 

74 

Member States, Italy

revenues  is  projected  to  decelerate  as no further
discretionary increase in taxation is planned. As a
share of GDP, total revenues are expected to peak
in 2013 and decrease somewhat in 2014. 

The  structural  balance  is  expected  to  improve
further  in  2013  –  by  around  1  pp.  of  GDP  –  and 
achieve  a  budgetary  position  close  to  balance.
Under 
the
structural balance is anticipated to depart from this
position in 2014. The structural primary surplus is
estimated to rise to above 5% of GDP in 2013 and 
broadly stabilise in 2014. 

a  no-policy-change 

assumption, 

the  financial  support 

Gross  government  debt  is  projected  to  increase 
significantly as a share of GDP in 2012 and 2013,
mainly due to the fall in real GDP and the impact
of 
to  other  euro-area 
countries.  The  debt-to-GDP  ratio  is  set  to start
decreasing in  2014,  as macroeconomic  conditions
improve and the primary surplus increases further. 
The  proceeds  expected  by  the  government  from
the planned privatisation programme over 2013-15 
(1 pp.  of  GDP  per  year)  are  not  included  in  the
forecast, as at the cut-off date the details needed to
estimate its impact had not yet been spelled out. 

fourth  consecutive  year  in  2013  and  increase 
slightly  in  2014.  By  contrast,  interest  expenditure
is  set  to  continue  increasing,  although  at  a  slower 
the  assumed
pace 
normalisation 
the
levelling-off of the debt-to-GDP ratio. 

in financial markets  and 

in  2012  due 

than 

to 

increase 

transactions 

the  VAT  rates' 

The draft budget contains a number of measures on 
the  revenue  side.  In  a  second move  aimed  at 
lessening 
that  was
legislated  in December  2011,  the  standard  and 
reduced  rates  are  now  set  to  increase  by  1  pp.  as
from July 2013. The further temporary increase in
excise  duties  on fuels  that  was  enacted  in  the
summer 2012 is made permanent, while a new tax 
introduced.  This, 
on  financial 
together  with  the  full  coming  into  force  of  the
increase  in  property taxation  enacted  in  2011,  is
expected to boost indirect tax revenues in 2013. By
contrast,  despite  the  increase  in the  tax  base,
revenue  from  direct  taxes  is set  to  remain  stable.
Tax 
to
personal 
EUR 28,000 per  year  are  reduced  by  1  pp.,  while
some  tax  expenditure  is  cut.  Moreover,  the  tax
incentives  on  performance-related  pay 
are
prolonged.  In  2014, the  increase  in current  tax

income 

rates 

up 

on 

is 

Table II.11.1:
Main features of country forecast - ITALY

2011

Annual percentage change

bn EUR Curr. prices
1579.7

% GDP
100.0

92-08
1.3

2009
-5.5

2010
1.8

2011
0.4

2012
-2.3

2013
-0.5

2014
0.8

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

969.0

323.4

308.9

132.3

455.6

479.0

1567.6

61.3

20.5

19.6

8.4

28.8

30.3

99.2

Domestic demand
Inventories
Net exports

1.2

0.9

1.2

1.8

4.5

3.9

-

1.1

0.1

0.2

-1.6

0.8

-11.7

-16.8

-17.5

-13.4

-4.9

-3.2

-1.2

-1.1

1.2

-0.6

2.1

12.0

11.4

12.5

1.8

1.0

1.2

-0.3

0.1

-0.8

-1.8

-1.1

6.0

0.6

0.1

-0.4

-0.5

1.4

2.3

8.4

0.1

7.8

9.2

0.3

3.3

1.7

8.4

2.3

-2.9

-0.9

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c) 
 Net lending(+) or borrowing(-) vis-à-vis ROW (c) 
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

110.4

120.7

119.2

116.4

18.3

14.2

12.7

12.0

-0.8

-3.9

-0.4

-3.9

-3.7

-3.3

-3.3

-4.3

-2.0

-3.5

-2.0

-3.6

-3.7

-4.8

-3.6

-3.5

-3.0

-4.4

-5.4

-4.5

-3.9

-1.1

-0.4

-1.3

-0.7

-0.6

2.4

7.4

3.0

3.0

0.2

0.3

0.8

2.1

0.4

1.6

1.2

1.3

2.9

1.5

4.6

0.9

0.1

-

-3.4

-0.7

-8.1

-10.9

1.1

-7.2

-2.2

-3.8

-1.0

2.5

-1.3

10.6

1.1

2.2

0.7

12.4

1.4

3.3

-1.5

0.8

-1.2

-1.2

-2.9

-1.3

-1.4

126.5

-0.9

-0.3

-2.1

-0.6

3.0

1.4

-0.5

-1.0

0.0

0.5

-1.0

11.5

1.3

0.8

-0.8

12.4

1.6

2.0

1.0

1.6

-0.4

-0.4

-2.1

-0.4

-0.4

0.9

-0.4

2.6

6.3

4.1

5.0

0.8

1.0

0.1

-0.2

0.4

11.8

1.2

0.8

-0.8

12.4

1.6

1.7

1.5

1.8

-0.3

-0.3

-2.1

-0.9

-0.8

127.6

126.5

75

12.  CYPRUS

Deep recession to prevail over the forecast horizon

Rapid deterioration in economic activity

The  weakness  of  economic  activity  seen  in  the
second  half  of  2011  is  expected  to  intensify  in
2012,  when  the  Cypriot  economy  is  projected  to
contract  by  2.3%  against  the  background  of 
unwinding  imbalances  and  widespread  loss  of
confidence  among  economic  agents.  The  fiscal
consolidation  effort  that  has  been  pursued,  the
rapid  deterioration  in  labour  market  conditions,
and the high degree of economic uncertainty have
together  weighed  heavily on  private consumption.
In addition, the tightening of credit conditions has
aggravated 
economic
environment while weak confidence has amplified
investment  activity. Adverse
the  drag  on 
developments 
the  external  environment,
particularly in Greece, and the sustained volatility
in  European  financial  markets have  affected
Cyprus  predominately via  developments  in  the
financial sector.

unfavourable 

the 

in 

to 

further  declines 

The  economy is  projected  to  contract  by  1.7%  in
in  domestic
2013,  due 
consumption, as well as in government and private
investments.  Economic  activity  is  expected  to
contract  further  by  0.7%  in 2014  with  domestic
demand  shrinking  further  and  net  exports  still
marginally  supporting  growth.  Traditionally  the
main  driver  of growth,  domestic  demand is  set  to
contract  over  the  forecast  horizon  driven  by
markedly weaker  consumer  confidence  and  lower
household  disposable  income,  which  stem  in  turn 
from  the  effects  of fiscal  consolidation  and  the
worsening  labour  market  outlook.  Investment  is
projected  to  decline  in view of  the  difficulties  in
accessing  credit  and  the  high  level  of  corporate 
indebtedness. In spite of the reconstruction work at
the  private
the  electricity  power  plan  and 
investment 
facility,
construction  activity  is  expected  to  continue  to
shrink strongly  in  2012  and  2013.  Although 
construction  indicators  suggest  that  the  correction
should  persist  in  2014,  this  is  expected  to  be  at  a
level  of 
milder  pace  reflecting 
economic activity in the economy as a whole. 

in  a  new  oil 

the  general 

storage 

On the other hand, the external sector is expected
to provide a positive contribution to growth for the
whole  forecast  period.  In  particular,  imports  of 
both  goods  and  services are  set 
to  decline
considerably against a backdrop of weak domestic

76

demand. Exports are expected to fall moderately in
2012,  while  the  projected  economic  performance
of Cyprus' major trade partners suggests a gradual
increase  in  exports  of  both goods  and  services  in
2013  and  2014.  In  services,  both  tourism  and
business  services  continued  to  perform well  in
2012 and this trend is expected to continue in the 
coming years. In particular, revenues from tourism 
are  expected  to  continue  to rise.  This  reflects  a
projected  increased  flow  of arrivals  from Russia 
and  new  destinations  helped  by  government
policies  promoting  tourism,  and  from  tourists' 
concern over stability in competing Mediterranean 
tourist  destinations.  Exports  of  transport  services
are  expected  to  shrink,  while  financial  and  other 
business  services  will  stagnate  over  the  forecast
horizon  in  view  of worsen  business  confidence.
Overall,  the  current-account deficit  is  expected  to 
narrow gradually over the forecast horizon in spite
of a deterioration of the income balance. 

Graph II.12.1:Cyprus - GDP growth and contributions

12

9

6

3

0

-3

-6

-9

-12

pps.

% of pot. GDP

forecast

6

4

2

0

-2

-4

-6

01 02 03 04 05 06 07 08 09 10 11 12 13 14

Output gap (rhs)
Inventories
GDP (y-o-y%)

Net exports
Dom. demand, excl. inv.

Worsening labour market conditions 

Employment  is  expected  to  worsen  in  2012  and 
subsequent years,  reflecting  the  slowdown  in
economic  activity.  Job  losses  are  particularly
prominent  in  labour-intensive  sectors such  as
construction  and  trade.  The  unemployment  rate 
would  remain  on  a  strong upward  trend,  rising
from 7.9% in 2011 to 12.1% in 2012, and is likely
continue to increase further in 2013 and to be close
to  14%  in  2014.  Given  the  unfavourable  labour 
the  effects  of  fiscal
market  conditions  and 
consolidation, wage  growth  is  expected  to  be
negative. In particular, the freezing of public sector 
wages until  2014  should  affect  wages  in  the
economy as a whole.  

Inflation declining

HICP  inflation  is  projected  to  decline  to  3.2%  in
2012 on the back of weaker domestic demand and
the  fading-out  of the  base  effect  of  the  electricity
prices increases in 2011 despite increasing oil and 
commodity  prices  and  of  VAT  standard  rate  by
2 pps. With domestic demand remaining subdued,
the  effect  of  the  VAT  increase  and  the  projected
decline  of  oil  and  commodity  prices,  headline
inflation  is  projected  to  ease  further  to  1.5%  in
2013 and to 1.3% in 2014.

Significant downside risks exist

financial  assistance
Cyprus  requested  external
from  the  EFSF/ESM  in view  of  the  challenges
facing  the  economy.  Under  the  no-policy-change
assumption  (the  draft  2013  Budget  not yet
available),  significant  downside  risks  are  present 
for  the  current  account,  public  finances,  and  the
financial 
economy's
testing 
sustainability.  Failure  to  raise  the  required  capital
and  to  put  policies  back  on  a  sustainable  path
could  dramatically worsen 
the  outlook  and
reinforce  the  negative  loop  of  lower  liquidity,
higher  indebtedness,  worsening  labour  market

sector, 

the 

Member States, Cyprus

conditions,  and  lower  productivity.  Furthermore, 
any worsening of the economic situation in Greece 
remains  a  significant  downside  risk  for  Cyprus  as
well as any further needs of recapitalisation for the
domestic banks.

Fiscal and financing imbalances prevail

The general government deficit is set to narrow to
5.3% of GDP in 2012. Should no further measures 
be  adopted,  the  deficit will rise  further  to  5.7%
GDP in 2013 and to 6% in 2014. The downgrading 
of  the  government sovereign  to non-investment
grade  raised yield  spreads  to  prohibitive  levels, 
with  the  government  covering  its financing  needs
through short-term  borrowing  from  the  domestic
market.  The  government's participation  in  the
recapitalisation  of  a  commercial  bank  (which was
unsuccessful 
capital 
enhancement  plan)  is  expected  to  increase  the
general government debt significantly from 71.1%
in 2011 to about 90% of GDP in 2012. In view of
shrinking economic activity, the government debt-
to-GDP  ratio  is  projected  to  reach  96.7%  in  2013 
and 102.7% in 2014. The fiscal imbalances are set
to  persist  despite  the  significant  consolidation
effort pursued in 2012.  

implementing 

its 

in 

Table II.12.1:
Main features of country forecast - CYPRUS
2011

Annual percentage change

mio EUR Curr. prices
17979.3

% GDP
100.0

92-08
4.3

2009
-1.9

2010
1.3

2011
0.5

2012
-2.3

2013
-1.7

2014
-0.7

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

11899.2

3584.2

2941.8

828.0

7699.0

8251.7

16481.6

66.2

19.9

16.4

4.6

42.8

45.9

91.7

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

4.4

-

-

-

-7.5

6.8

-9.7

-0.3

-10.7

-18.6

-4.9

-6.3

-1.6

5.7

1.5

1.0

-4.9

-5.9

3.8

4.8

2.4

0.2

1.8

-0.7

0.2

-0.2

-13.1

-23.1

3.3

-4.1

3.6

-2.4

-0.5

3.4

-

-

-

-

7.9

2.7

6.4

2.5

5.5

0.5

0.0

-0.5

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-25.5

-24.2

-10.6

-10.7

-26.8

58.5

11.4

71.1

61.3

11.6

-6.1

-5.9

-4.2

-6.3

-6.2

-6.2

-4.0

-6.1

-5.3

-5.3

-9.2

-9.0

-5.3

-0.5

-0.9

-0.6

3.4

4.1

0.1

1.9

2.7

3.9

3.8

0.2

2.7

1.4

2.6

3.3

3.3

0.5

3.5

-

-

-

-

-

-

-

-

-

-

-

-3.4

-1.7

-22.0

-26.0

-0.9

-9.3

-2.4

-6.2

0.0

3.9

-4.0

12.1

-0.9

-2.6

-4.2

5.2

1.6

3.2

-1.7

-6.3

-5.5

-5.3

-4.4

-4.6

89.7

-21.9

-3.6

-2.4

-12.0

-11.0

0.8

-5.5

-1.7

-4.4

0.0

2.8

-0.6

13.1

-0.3

0.8

-0.7

7.3

1.5

1.5

-0.1

-20.6

-3.5

-2.7

-5.7

-4.8

-4.8

96.7

-0.9

-1.5

-5.3

-3.7

1.3

-0.4

-0.7

-1.5

0.0

0.7

-0.3

13.9

0.5

0.9

-0.4

7.5

1.2

1.3

-0.9

-20.7

-3.0

-2.4

-6.0

-5.3

-5.3

102.7

77

13.  LATVIA

Growing fast again

Economic performance beats expectations 

After  acute  boom  and  bust periods,  the  Latvian 
economy is again the fastest growing in the EU. In
the first two quarters of 2012, real GDP surged by
5.5% y-o-y and 4.6% y-o-y in seasonally-adjusted
terms. Recent retail and industrial sales, as well as 
confidence  surveys,  suggest  continuous  strong 
performance on the domestic market, while export
expansion 
is  somewhat weakened  by lower
external  demand.  Full-year  growth  is  therefore 
expected  to  slow  to  4.3%  in  2012  and  3.6%  in
2013,  albeit  still  outpacing  all  other  EU  Member
States.  Risks  are  on  the  upside  in  2012,  as
indicated  by  the  latest monthly indicators,  and
broadly  balanced  in  2013.  In  2014,  growth  is
projected to accelerate to 3.9% on expectations of 
better external demand. 

Graph II.13.1:Latvia - GDP growth and contributions

down triggered by external demand but there were
also signs of expanding import substitution.

Inflation slows as expected

to 

the  year,  due  mainly 

In line with the spring forecast, inflation slowed in 
the  course  of 
the
moderation  in  the  price  of  energy  and  food 
commodities.  As of July 2012, the headline index 
(HICP)  even  dropped  slightly  below 
initial
expectations  as  authorities  decided  to  cut  the 
standard VAT rate to 21% from 22%. The annual
average inflation is now projected at 2.4% in 2012
and 2.1% in 2013. Core inflation is set to move at
similar  rates  as  energy  and  food  commodities  are
not  seen  as  inflation  drivers  over  the  forecast
horizon.  In  2014,  HICP  is forecast  to  rebound
slightly to  2.3%  over  improved  growth  prospects
in Europe. 

forecast

Economic recovery boosts labour supply

pps.

21

14

7

0

-7

-14

-21

-28

-35

04

05

06

07

08

09

10

11

12

13

14

Dom. demand, ex. invent.

Inventories

Net exports

GDP growth (y-o-y%)

On  the  demand  side,  investments  and  private
consumption were the major growth drivers in the 
first  two  quarters  of  2012.  Investments in  fixed
assets  rose  by  annualised  39%  and  20.5%
respectively,  benefiting from  high  profits  in  the
corporate  sector  and  needs  of  capacity  and
technology upgrades after the steep contraction in 
increased  by
2008-09.  Private  consumption 
annualised 5.4% and 7.2% in the first two quarters
paced  by  lower  debt  service  costs  of households,
lower  saving  propensities,  employment  and wage
in  net
growth, 
emigration.  On  the  supply  side,  construction  and
manufacturing were the best performers in the first 
half  of  the  year  with  annualised  real  growth  rates
of  25.2%  and  12.3%  respectively.  Tourism,
information  technologies  and  transportation  also
rose  at  above-average  rates.  In manufacturing,
exporters retained high growth despite some slow-

substantial 

reduction 

and 

78

Unemployment dropped only marginally, to 16.1%
in  the  second  quarter  of  2012  relative  to  17.1%  a
year earlier, according to Eurostat data for the age
group  of  15-74.  After  a  continuous  contraction  in
previous years, labour supply stabilised in the first
half of 2012 as discouraged persons returned to the
labour  market  and  the  flow  of net  emigration 
declined significantly. Employment is expected to
rise by 1.8% in 2012 but its impact on the jobless
rate  is  partly  offset  by  the  increase  in  the  overall
number  of  job  seekers.  Taking  into  account  all
these factors,  the  year-average  unemployment is
projected to drop further to 15.2% in 2012, 14.3%
in 2013, and 12.7% in 2014.

Foreign-trade gap widens over strong demand

The  foreign-trade  deficit  continued  to  expand  in
for 
2012  as  domestic  demand,  especially
investment  goods,  rose  at  a  high  rate.  However,
exports  grew slightly faster  than  imports  in  real
terms in the first half of the year and the speed of
deficit widening slowed. After an upward revision 
in  the  current-account  deficit  to  2.4%  of  GDP  in
2011,  projections  point
to a  relatively modest
expansion  in  the  following  years,  bringing  the
deficit  to  about  3.5%  of  GDP  in  2014.  Non-debt
transfers  in  the  capital  account  are  expected  to 
fully offset the current-account gap and to keep the
country's net lending position broadly stable.

Public finances reflect the recovery

improve 

macroeconomic 

The 
sound
developments
the  outlook on public
substantially 
finances. However, several decisions taken in mid-
2012  have  an  impact  on  the  short  and  medium-
term  outlook.  Firstly,  the  VAT  rate  was  cut  by  1
pp.  from  July  2012  and  the  personal  income  tax 
will  be  reduced  by  1  pp.  as  of  2013,  2  pps.  as  of
2014,  and  2  pps.  as  of  2015.  Secondly,  the
Parliament passed a mid-year 2012 supplementary
budget  in  September,  increasing  revenue  and
expenditure  targets  by  1.6%  and  1.4%  of  GDP
respectively,  including  more  effective  use  of EU
structural  funds.  As  a  result,  the  projected  2012
deficit drops by less than  what the revision in the 
macroeconomic  outlook  implies,  from  2.1%  of 
GDP in the spring forecast to 1.7%. The structural
balance nevertheless continues improving in 2012. 

The 2013 draft budget adopted by the government
on  25  September  aims  at  a  general  government
deficit of 1.4% of GDP. The partial restoration of 
fully-funded
contributions
pension  pillar  –  to  4%  of  gross  wages  from  the
current reduced rate of 2% against the target of 6% 

the  mandatory 

to 

Member States, Latvia 

to  be  reached  in  2016  –  will  reduce  government
revenue  by  around  0.5%  of  GDP.  In  addition, 
revenue  is negatively  affected  by  the  VAT  and
personal  income  tax  cuts  described  above.  At  the
same time, decisions that restrict social benefits –
notably  the  continuous suspension  of  pension 
indexation  –  coupled with  a  limited  and  targeted
increase  in public  wages  would ensure  some
improvement  in  the  ratio  of  general government
deficit  to  GDP.  The  outlook for  2014  is  based  on
the  no-policy-change  assumption,  while  it  reflects
decisions currently 
in  force,  notably further
reduction in the personal income tax, as well as the
expected  resumption  of  pension  indexation from
late  2014.  The  risks  to  the  outlook  for  public
finances  include  on  the  upside  a  possibility  of
better tax revenue due to higher tax elasticities, as
the 
undeclared  economic  activity
diminishes,  and  on the  downside  a  growing 
pressure  to  increase  spending  after  years  of  fiscal
consolidation.  The  structural  balance  is  projected
to  deteriorate  by  ¼  pp.  of  GDP  in  both  2013  and
2014. The government debt-to-GDP ratio is set to
rise  over  the  forecast  period,  as  the  authorities
accumulate  assets for  large  repayments  due  in 
2014-15.

share  of

Table II.13.1:
Main features of country forecast - LATVIA
2011

Annual percentage change

mio LVL Curr. prices
14275.3

% GDP
100.0

92-08
2.0

2009
-17.7

2010
-0.9

2011
5.5

2012
4.3

2013
3.6

2014
3.9

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

8835.7

2296.1

3044.5

1558.3

8392.4

9080.7

61.9

16.1

21.3

10.9

58.8

63.6

-

-

-

-

-

-

14351.1

100.5

1.8

Domestic demand
Inventories
Net exports

-

-

-

-22.6

-9.4

-37.4

-

-14.1

-33.3

-10.6

-29.8

-2.5

14.6

2.4

-7.9

-18.1

-

11.6

11.4

-6.1

-4.2

3.7

-0.4

4.5

1.1

27.9

-

12.7

22.7

4.0

9.1

2.7

-6.3

-

-

-1.3

-6.7

-4.8

-8.1

16.2

19.8

18.2

12.1

-13.2

-12.7

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-10.8

-10.4

-14.7

10.3

36.7

42.2

28.6

44.5

18.2

11.1

-7.1

-7.0

-1.7

-1.9

-1.2

-3.4

-2.8

-6.0

-6.3

-1.3

-2.9

-9.8

-7.9

-6.7

-3.2

-4.9

-8.1

-9.2

-1.2

-6.1

-3.9

-0.2

-2.4

-1.1

1.5

4.2

5.9

3.0

1.1

5.8

3.3

4.2

8.6

2.9

4.9

-

-

-

-

-

-

-

4.7

1.1

9.2

-

5.1

5.3

4.2

5.7

-0.7

-0.7

1.8

15.2

3.1

0.6

-1.8

-0.5

2.5

2.4

-0.3

-2.9

-0.2

-1.7

-1.2

-1.2

41.9

-11.5

3.9

1.5

6.7

-

4.8

5.5

3.5

4.7

-0.1

-1.0

1.3

14.3

2.6

0.3

-1.7

0.2

2.0

2.1

0.0

3.9

2.0

7.6

-

6.9

7.3

3.9

5.0

0.0

-1.1

2.1

12.7

3.4

1.6

-0.5

0.1

2.1

2.3

0.0

-12.1

-12.6

-3.1

-0.1

-1.5

-1.5

-1.5

44.3

-3.5

-0.2

-1.4

-1.7

-1.7

44.9

79

14.  LITHUANIA 

Growth continues at a slower pace 

Low confidence affects domestic demand 

Lithuania's economy remained resilient to adverse 
external  developments  in  the  first  half  of  2012, 
although persisting uncertainty started to weigh on 
the  sentiment  of  economic  agents.  After  strong 
economic  growth  of  5.9%  in  2011,  domestic 
demand  has  started  to  lose  momentum.  Yet  it  is 
expected  to  remain  the  principal  growth  driver 
over the forecast horizon.

Graph II.14.1:Lithuania - GDP growth and 
contributions, output gap

pps.

% of pot. GDP

12

forecast

6

0

-6

-12

-18

20
15
10
5
0
-5
-10
-15
-20
-25
-30

07

08

09

10

11

12

13

14

Output gap (rhs)

Net exports

GDP (y-o-y%)

Inventories

Dom. demand, excl. invent.

In the first half of 2012, private consumption grew 
by  6%  y-o-y,  supported  by  a  recovering  labour 
market  and  reduced  debt-servicing  costs.  At  the 
same time, low business confidence acted as a drag 
on  investment,  which  slowed  to  4.6%  y-o-y. 
Adverse developments in the external environment 
as  well  as  the  temporary  closure  of  an  important 
oil  refinery  had  a  negative  impact  on  trade.  Real 
imports  grew  by  mere  1.4%  y-o-y  while  exports 
grew  by  4%.  These  developments 
to  a 
led 
slowdown of real GDP growth to 3% y-o-y.  

the 

For 
remainder  of  2012,  high-frequency 
indicators  suggest  sustained  output  growth,  with 
domestic demand as the main driver, although at a 
slower pace. Even if credit is available in principle, 
companies  are  expected  to  continue  delaying 
investment. This can be explained by a persistently 
weak  external  environment  and  to  a  lesser  extent 
by political uncertainties in the wake of October’s 
general elections.  Lithuania's  real GDP is forecast 
to  grow  by  2.9%  in  2012,  with  some  upside  risks 
as underlined by the latest monthly indicators.  An 
expected stabilisation in the euro area and a slight 
pick-up during the second half of 2013 will have a 
positive  impact  on  trade,  improve  confidence  of 

80 

businesses, and give impetus to private investment. 
Real  GDP  is  projected  to  grow  by  3.1%  in  2013, 
with  broadly  balanced  risks.  Public  investment  is 
assumed  to  continue  growing  steadily  over  the 
forecast  horizon,  supported  by  EU  co-financed 
projects. The economy is forecast to grow closer to 
its  potential  in  2014,  by  3.6%,  reinforced  by 
accelerating consumption. 

Labour  market  set  to  continue  a  progressive 
recovery 

Employment  continued  to  grow  across  all  sectors 
in the first half of 2012 and the unemployment rate 
decreased  to  13.3%.  However,  no  significant 
improvement is expected in the coming months, as 
companies  delay  hiring  on  the  back  of  low 
business confidence. Employment growth is set to 
accelerate towards the end of the  forecast  horizon 
when business sentiment improves as the Eurozone 
recovery  gains  some  momentum.  However,  the 
unemployment  rate  is  likely  to  remain  at  double 
digit  levels,  thus  limiting  prospects  for  nominal 
wage  growth.  Real  wages  are  still  declining  and 
are expected to stabilise only at the end of 2013.  

Inflation keeps moderating 

growth.  However, 

Inflation  (HICP)  started  to  fall  in  2012,  reflecting 
weaker  growth 
in  food  and  energy  prices. 
Domestic  price  pressures  remained  moderate,  on 
account  of  slower  domestic  demand  growth  and 
several 
limited  wage 
administered prices increased. In September 2012, 
12-month  average 
inflation  stood  at  3.4%, 
decreasing  from  the  annual  average  of  4.1%  in 
2011.  12-month  average  core  inflation  remained 
stable  at  2.4%.  HICP  is  expected  to  inch  down 
only  marginally,  to  3.1%  in  2013  and  3.0%  in 
2014. The impact from lower commodity prices is 
projected to be counterbalanced by further planned 
administered  price  increases  in  2013  and  to  some 
extent 
the 
recovering labour market in 2014.

inflation  pressure  coming 

from 

Current-account deficit after revision 

The  revised  current-account  deficit  was  3.7%  of 
GDP  in  2011  (instead  of  1.6%).  The  deficit 
narrowed to 2.3% in the  first half of 2012  mainly 
due to an improvement in the trade balance. This is 
expected  to  reverse  progressively  throughout  the 

Member States, Lithuania 

rights fell considerably short of expectations.

is  based  on

In  the  absence  of  a  draft  budget  for  2013  due  to
general  elections,  the  general  government  deficit
forecast 
a  no-policy-change
assumption  and  only takes  into  account measures
already  adopted  by  the  government.  These  are  in
particular  the  public  sector  wage  freeze,  and  an 
increase in excise duties on gasoline and cigarettes
that  more  than  compensate  the  extension  of 
reduced  VAT  rates  for  transport  and  media.
Additionally,  the  deficit  of the  social  insurance
provider SoDra is projected to further decrease on 
the back of an improved performance of the labour 
market  and  reduced  pension  payments  due  to
gradual  increase  in  retirement  age.  The  general
government deficit is thus forecast to drop to 2.8% 
of GDP in 2013. 

General  government  debt  is  set  to  increase  from
38.5% of GDP in 2011 to 41.6% at the end of 2012 
and  to  stabilise  slightly  above  40%  by  the  end  of 
the forecast horizon. The debt hike in 2012 can be
explained  by  a  loan  to  the  deposit  insurance
company following  the  bankruptcy  of  the  Snoras 
bank and pre-financing for major bond redemption 
in early 2013. 

forecast  horizon  as  domestic  demand  regains
momentum.  Consequently, with  relatively  stable
positive  current  transfers  and  negative  income
balance, the current-account deficit is projected to
reach 3.0% of GDP in 2013 and 3.6% in 2014.

Fiscal consolidation continues 

In  2011,  Lithuania's  general  government  deficit
had  narrowed  to  5.5%  of  GDP  and  is forecast  to
reach 3.2% in 2012 on the back of a stronger-than-
expected  economy  and  continued  fiscal  restraint.
While  revenues  are  close  to  plan,  expenditure  is
lower  than  projected.  The  structural  deficit  is
estimated  to  decrease  from  4.9%  of  GDP  in  2011
to 2.7% in 2012 and further to 2.1% in 2013-14.

The  2012  budget  contains  substantial  cuts  in 
expenditure,  with  spending  on  goods  and  services
and  social  benefits  declining.  The  public  sector 
wage  freeze  has  been maintained  for  a  third  year.
Some  temporary measures  limiting  the  growth  of
social  benefits have  been made  permanent.  Social
security pensions, cut at the beginning of the crisis, 
have  been  brought  back to  pre-crisis  levels. 
Non-tax 
from 
state-owned  enterprises whereas  sales  of  carbon

included  dividends 

revenues 

Table II.14.1:
Main features of country forecast - LITHUANIA

2011

Annual percentage change

bn LTL Curr. prices
106.4

% GDP
100.0

92-08
1.9

2009
-14.8

2010
1.5

2011
5.9

2012
2.9

2013
3.1

2014
3.6

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

67.4

20.2

18.9

6.1

82.5

85.5

102.4

63.4

18.9

17.8

5.7

77.6

80.4

96.3

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-17.8

-1.4

-39.5

-50.0

-12.6

-28.1

-10.6

-22.0

-5.4

12.6

-4.7

-3.4

1.9

20.6

17.4

18.0

-2.2

-3.7

5.8

-0.6

6.4

0.5

18.3

32.6

14.1

13.7

4.0

7.2

-1.3

0.0

-

-

9.1

2.0

-5.1

-6.8

-0.7

-0.4

-9.9

17.8

15.4

13.7

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

29.3

38.5

36.0

37.9

-4.9

-4.9

-5.9

-3.4

-0.4

-5.5

-0.1

-6.6

-7.0

-3.3

-9.4

-1.5

-4.9

-4.9

-4.9

-7.2

-6.9

-0.4

-8.8

-0.6

-5.9

-3.7

-5.3

1.2

4.3

5.4

6.4

3.5

3.6

2.0

4.2

2.1

2.0

1.2

1.4

4.1

-

-

-

-

-

-

-

-

-

-

-

-

4.2

-1.5

3.1

3.5

5.0

4.1

3.4

2.9

-0.5

0.6

1.7

13.5

3.5

2.3

-0.1

-

2.3

3.4

-0.5

-5.8

-2.9

0.5

-3.2

-2.6

-2.7

41.6

3.3

0.5

4.8

4.0

5.3

5.3

3.2

3.1

0.1

-0.1

1.0

12.4

2.6

0.5

-2.2

-

2.7

3.1

-0.5

-6.3

-3.0

0.1

-2.8

-2.3

-2.1

40.8

4.1

2.3

7.7

8.0

6.9

7.6

3.8

4.5

0.0

-0.8

1.4

10.9

3.4

1.1

-1.8

-

3.0

3.0

-0.2

-7.1

-3.6

-0.5

-2.3

-2.1

-2.1

40.5

81

15.  LUXEMBOURG 

Approaching a crossroad 

Economy weaknesses at play 

After  growing  by  2.9%  y-o-y  in  2010,  economic 
output  decelerated  to  1.7%  in  2011  and  the 
slowdown continued in the first half of 2012, with 
GDP  expanding  by  0.1%  and  0.4%  q-o-q  in  the 
first  and  second  quarters,  respectively.  Although 
growth is still more dynamic than in the euro area, 
the  deceleration  could  be  rather  of  a  structural 
nature,  for  an  economy  until  now  almost  spared 
from the crisis.  

The  economy  is  heavily  reliant  on  the  financial 
service and steel industries at a time when both are 
sailing across turbulent waters. While the financial 
services  sector  continues  to  show  a  positive 
although  weakening  trend,  manufacturing,  and  in 
particular steel production is on a clearly declining 
path since the second quarter of 2011. Since then a 
number  of  important  iron  and  steel  plants  closed 
partially.  In  contrast,  the  retail  and  other  services 
sectors showed some resilience.  

Graph II.15.1:Luxembourg - GDP growth and 
contributions

pps.

10
8
6
4
2
0
-2
-4
-6
-8

2000

2002

2004

2006

2008

2010

2012

2014

Private consumption
Investment
Net exports

Public consumption
Inventories
GDP growth (y-o-y%)

Growth  expectations  for  2012  have  been  lowered 
compared to the spring forecast and output is now 
expected  to  slightly  increase  by  0.4%.  During  the 
first  part  of  the  year,  weak  domestic  demand  was 
counterbalanced  by 
the  external  sector,  with 
imports falling at a faster pace than exports. In the 
second half of the year GDP is estimated to show a 
broadly  flat  profile 
the  weak 
in 
performance  of 
the  euro  area,  Luxembourg's 
principal  export  market.  The  catalyst  for  a  return 
of activity is expected to be external demand, with 
net  exports  progressively  diminishing  its  negative 
contribution  to  growth  over  2013.  Increasing 
confidence  should  support  a  gradual  return  of 

line  with 

82 

growth from the  second quarter of 2013 onwards, 
resulting  in  a  0.7%  growth  in  2013  on  average. 
Again, the expansion will be exclusively supported 
by  domestic  demand,  while  contribution  of  net 
exports  is  expected  to  become  flat,  after  being  a 
drag  on  economic  output  since  2008.  Financial 
services  should  start  to  benefit  from  the  progress 
made  to  overcome  the  sovereign-debt  crisis,  but 
over  the  forecast  horizon  this  sector  is  not 
projected to return to its pre-crisis dynamism. The 
limited  fiscal  consolidation  measures  contained  in 
the  draft  budget  are  also  expected  to  exert  some 
downward pressure on growth. 

In  2014,  GDP  is  projected  to  grow  by  1.5%,  a 
faster pace than in 2013 but still far below its pre-
crisis  rates.  The  main  contribution  to  growth  will 
again  come  from  domestic  demand,  while  the 
external  balance  is  also  expected  to  contribute 
positively,  for  the  first  time  since  the  outbreak  of 
the worldwide economic and financial crisis.  

The  main  downside  risk  for  this  growth  scenario 
lies in the export performance of financial services, 
which  would  be  heavily  affected  should  further 
unrest hit financial markets worldwide.  

After  peaking  at  3.7%  in  2011,  HICP  inflation  is 
expected  to  slow  down  to  2.9%  in  2012.  It  has 
been  driven  upwards  by  rising  prices  for  oil  and 
other  raw  materials.  The  dampening  effect  on 
inflation exerted by less dynamic oil prices in 2013 
and  2014  will  partially  offset  in  2013  by  the 
planned  rises  in  administered  prices.  Inflation  is 
expected  to  decrease  to  1.9%  and  1.8%  in  2013 
and 2014, respectively. The national index (NICP), 
which  has  a  lower  weight  for  oil  products,  is 
expected  to  fall  from  3.4%  in  2011  to  2.7%  in 
2012 and to 2.2% in 2013 and 2014.  

Job creation to slow down 

Job  creation  in  Luxembourg  was  substantial  in 
2011  despite  a  slowdown  towards  the  end  of  the 
year. However, this employment increase of 2.9% 
has  not  been  sufficient 
the 
unemployment  rate,  which  stabilised  just  above 
5%  in  the  first  half  of  2012.  Job  creation  is 
expected  to  decelerate  to  around  1.9%  in  2012, 
moving 
to  5.4%  on 
average.  With  economic  growth  only  slightly 

the  unemployment  rate 

to  bring  down 

forecast

Price pressure set to decline 

Member States, Luxembourg

factors will lead to a steady increase in the general
government  deficit  to  close  to  2%  in  2012. The 
implementation  of the  fiscal measures  announced 
by  the  government  in  the  2013  draft  budget  is
expected to curb the evolution of expenditure and 
boost  revenues.  For  2013  the  general government
deficit is therefore projected to decline to 1.7% of
GDP.  In  2014,  as  the  projected  acceleration  in
revenues  supported  by  higher  growth will  not
completely  offset  the  rising  trend  of  government 
expenditure, the deficit-to-GDP ratio is forecast to
increase  marginally.  The 
structural  balance
estimated  to  around  ¼%  of  GDP  for  2011  is
projected  to  deteriorate  to  around  1%  of  GDP  in
2012  and  broadly stabilise  there  over  the  forecast
horizon.

the 

in  2011.  Given

Public  debt  fell from  19.2%  of  GDP  in  2010  to 
18.3% 
rising  central
government  deficit  the  debt-to-GDP  ratio  of  the
general government 
to  steadily 
increase from 21.3% in 2012 to 26.9% of GDP in
2014.  The  increase  in  the  debt-to-GDP  ratio  is
partly  due  to  the  contribution  of Luxembourg  to
the EFSF and ESM disbursements.

is  expected 

the 

forecast  horizon  and 

positive  over 
the
adjustment  of  employment  still  ongoing,  slow  job 
growth will  continue  throughout  2013  and  2014.
This, together with a still strong increase in active
translate 
population, will 
higher
unemployment 
in  2014.  The 
rate  of  6.4% 
agreement  with  the  social  partners  signed  on
January  2012  to  limit  the  automatic  indexation  to
2.5% up to 2014 will temper wage growth over the
forecast horizon. On the whole, wages per head are
now  expected  to  increase  by  2.2%  on  average  in
2012 and 2013, then to accelerate to 3.2% in 2014.

into 

a 

Public  finances  hardly  improve  in  the  coming
years

The  general government  deficit  came  out  at  0.3%
of  GDP  in  2011,  which  is better  than  expected. 
This  is  the  combination  of the  accumulation  of 
pension  reserves  in  the  social  security subsector 
while there is a deficit of 2.8% at the level of the
central  government.  In  the  first  half  of  2012
revenues have  been  affected  by 
the  weak 
performance  of financial  sector  activities,  which
contribute  to  around  25%  of  fiscal  revenues.  On
the  other hand,  expenditure  on  government
consumption  is rising  autonomously. These two 

Table II.15.1:
Main features of country forecast - LUXEMBOURG

2011

Annual percentage change

mio EUR Curr. prices
42624.6

% GDP
100.0

92-08
4.1

2009
-4.1

2010
2.9

2011
1.7

2012
0.4

2013
0.7

2014
1.5

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

13321.7

7002.5

8097.2

2711.4

75228.3

61920.4

30773.1

31.3

16.4

19.0

6.4

176.5

145.3

72.2

Domestic demand
Inventories
Net exports

2.4

3.9

5.1

4.7

7.4

7.3

3.0

2.8

-0.1

1.5

-1.7

4.5

-15.5

-34.4

-10.9

-14.1

-19.9

-3.2

-2.4

1.5

2.2

3.0

6.8

28.5

7.7

12.1

6.6

2.6

3.7

-3.3

2.4

1.5

10.2

24.6

5.5

8.6

7.4

2.9

1.3

-2.5

1.8

3.5

5.2

13.0

-4.2

-3.8

-0.3

2.1

0.0

-1.8

2.9

4.8

1.9

2.7

1.1

3.5

3.4

5.1

3.3

1.8

4.6

2.7

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-11.3

-10.8

15.3

13.5

18.3

10.7

19.2

-5.6

-1.7

-9.0

-9.2

-0.3

-0.8

-0.8

-0.1

6.8

2.9

0.0

7.1

1.6

6.9

1.0

7.2

5.9

2.4

7.6

0.5

7.3

3.7

5.1

2.0

3.3

8.2

0.9

0.9

6.4

0.0

0.0

0.0

2.8

7.6

0.2

0.2

6.8

3.7

-

-

-

-

-

-

-

1.9

5.4

2.3

3.9

1.9

-

1.9

2.9

-0.2

-13.6

4.4

4.4

-1.9

-1.1

-1.1

21.3

0.5

1.2

2.0

2.0

0.9

1.1

0.9

0.8

0.0

0.0

0.8

6.4

2.7

2.8

-0.5

-

3.3

1.9

1.0

1.6

1.4

2.5

2.0

3.1

3.5

1.5

1.2

0.0

0.3

1.3

6.4

3.2

3.0

0.7

-

2.2

1.8

1.0

-13.8

-14.3

4.9

4.9

-1.7

-0.9

-0.9

23.6

4.7

4.7

-1.8

-1.1

-1.1

26.9

83

16.  HUNGARY 

Fiscal challenges amidst subdued growth prospects 

From recession to a slow recovery… 

After  a  recession  in  2012,  a  weak  recovery  is 
expected  for  2013  and  2014.  The  economy  is 
characterised  by  weak  potential  growth,  partly 
caused  by  policy  uncertainty  and  increasingly 
distortionary  taxes,  most  notably  very  high  extra 
burdens on the financial sector.  

While  GDP  expanded  by  1.6%  in  2011,  the 
Hungarian  economy  entered  into  recession  in  the 
first half of this  year. Negative GDP  growth rates 
were caused by a large drop in domestic demand. 
Investment  has  declined  for  the  fourth  year  in  a 
row to a historically low rate if compared to GDP. 
Partly on account of decreased savings, household 
consumption 
to 
tightened  fiscal  policy.  From  the  production  side, 
GDP  has  been  dragged  down  by  exceptionally 
weak agricultural output as a result of a drought. 

relatively 

remained 

resilient 

the  contraction 

GDP is expected to decline by 1.2% on average in 
2012,  due  to  shrinking  domestic  demand  and 
slowing  export  markets.  A  moderate  growth  in 
exports  cushions 
in  domestic 
demand.  Exports,  which  remain  the  only  demand 
component  to  grow  on  an  annual  basis,  are 
projected to expand at around 2%, well below the 
to  weakening  export 
2011  rate.  In  addition 
markets,  this  can  also  be  explained  by  the  higher 
sensitivity  of  certain  manufacturing  sectors  to  the 
global  slowdown.  The  production  in  a  new  car 
plant  with  very  large  capacity  is  however  set  to 
help  keeping  exports 
territory.
Although the contraction is expected to ease off in 
the  second  half  of  the  year,  domestic  demand  is 
projected  to  fall  by  2.6%  on  a  yearly  basis.  As 
most 
suggest,  household 
consumption  is  expected  to  react  more  to  falling 
disposable income than in the first half of the year, 
and  investment  is  also  expected  to  decline  further 
as  a  result  of 
lending  conditions  and 
economic uncertainty regarding both domestic and 
export markets. 

in  a  positive 

indicators 

recent 

tight 

In  2013,  a  weak  recovery  is  expected  to  be 
primarily driven by improving export markets, but 
increasing  production  in  the  recently  installed  car 
production  facilities  might  contribute  to  stronger 
export growth. Therefore a rise in  market share is 
projected.  While  government  consumption  will 
broadly  stagnate,  domestic  demand  is  expected  to 

84 

slightly  decline  on  account  of  a  moderate  fall  in 
investments  and  a  steeper  one  in  household 
consumption.  An  improvement  in  quarterly  rates 
of  private  investment  is  expected  to  result  from 
better  performance  of  export  markets,  but  overall 
lending  conditions  are  expected 
remain 
relatively  tight.  As  a  result  of  declining  real 
income  of  households,  private  consumption  is 
expected  to  diminish  further  in  the  first  half  of 
2013. 

to 

Overall  GDP  growth  of  around  ¼%  is  projected 
for  2013,  with  an  acceleration  to  around  1¼%  in 
2014.  Growth  in  2014  is  expected  to  be  more 
broadly  based  than  in  the  year  before.  A  further 
improvement in export markets and a strengthened 
capacity of newly installed car production facilities 
contribute  to  a  pick-up  in  exports,  and  domestic 
demand  is  expected  to  grow  to  ½%.  While  looser 
to  support 
lending  conditions  are  expected 
investment somewhat, increasing employment and 
moderating 
support 
is 
inflation 
consumption growth.  

likely 

to 

Risks  to  growth  are  on  both  sides.  On  the  one 
hand, tighter than assumed financial conditions can 
lead  to  a  weaker-than-projected  growth  over  the 
forecast horizon, while more resilient employment 
growth can pose an upside risk to consumption and 
GDP. 

…labour  market  outcomes  are 
slightly 

improving 

at 

targeted 

Labour  market  conditions  are  expected  to  timidly 
improve but to remain weak. As a consequence of 
raising 
government  measures 
participation, the activity rate is projected to grow 
continuously.  Despite  this  rise,  unemployment  is 
set  to  remain  broadly  stable  as  employment  is 
projected  to  show  an  unequal,  though  continuous, 
increase.  While  in  2012  the  key  factor  behind 
employment 
increased 
participation  in  public  work  programmes,  the 
is 
importance  of  private  sector  employment 
expected to increase throughout the whole forecast 
period. This  is  likely  to  occur  mainly  in  the  SME 
sector,  partly  due 
targeted  government 
to 
measures,  most  notably  the  Job  Protection  Act 
(JPA).  The  decrease  in  GDP  and  concomitant 
increase  in  employment  would  result  in  a  rapid 
in  2012. 
increase 

growth  would 

in  real  unit 

labour  costs 

be 

However, real unit labour costs are expected to fall 
by  more  than  3%  in  2013,  in  line  with  the 
security 
substantial 
contributions (JPA). 

decrease 

social 

of 

Inflation 
remains  high  on  account  of 
government  measures  and  increasing  food 
prices 

In 2012, inflation is  forecast  to remain stubbornly 
high.  In  addition  to  indirect  tax  hikes  (e.g.  excise 
duty  hikes  on  tobacco  in  February,  July  and 
December), this is explained  by a pick-up in food 
inflation  due  to  unusually  dry  weather  conditions. 
New  sectoral  taxes,  further  indirect  tax  hikes  as 
well  as  the  prolonged  effect  of  agricultural  prices 
on  processed  foods  are  likely  to  affect  also  the 
inflation figures over the next years. Consequently, 
inflation  is  expected  to  remain  well  above  the 
in  2013,  while 
target  of  3% 
central  bank's 
gradually abating toward this level in 2014. 

Government  deficit  is  expected  to  rise  above 
3% of GDP by 2014   

The  official  deficit  target  for  2012  was  revised 
from  2.5%  of  GDP  to  2.7%  of  GDP,  but  the 
forecast shows an outcome of 2.5% of GDP. This 
forecast accounts with one-off revenues of 0.9% of 
GDP  stemming  from  the  extraordinary  sector 
taxes,  the  take-over  of  further  private  pension 
assets and the sale of telecommunication licences. 
It  also  integrates  a  number  of  saving  measures  of 
0.4% of GDP announced in  October 2012 as  well 
as 
the  bulk  of  contingent 
expenditure cuts.  

the  activation  of 

incorporates, 

For  2013,  a  deficit  of  2.9%  of  GDP  is  projected. 
This  forecast 
inter  alia,  higher 
expenditure of line ministries contained in the draft 
2013  budget  compared  to  the  2012  Convergence 
Programme  by  more  than  ½%  of  GDP  (which 
contribute  to  putting  the  expenditure  ratio  on  an 
increasing path in this forecast), and the tax cutting 
measures included in the JPA with a net budgetary 
impact  of  around  ¾%  of  GDP.  It  also  takes  into 
account  the  elements  of  the  fiscal  corrective 
packages  announced  by  the  government  in  two 
steps in October 2012 that are sufficiently detailed. 
Among  others,  they  include:  an  increase  of  the 
financial  transaction  duty  on  the  financial  sector 
and  the  Treasury,  as  well  as  the  postponement  of 
the  decrease  of  the  extraordinary  tax  on  financial 
institutions 
the 
introduction  of  the  new  compensation  scheme  in 

in  place  since  2010  and  of 

Member States, Hungary 

to 

education 

sector.  According 

the 
the 
Commission,  the  net  effect  of  these  corrective 
packages is estimated to be around 1½% of GDP, 
also including negative growth effects. These latter 
are  relatively  limited  in  the  short  run  but  will 
increase substantially over time. 

conservative 

tax  administration 

The  difference  between  the  government's  new 
2013  deficit  target  and  the  Commission's  deficit 
projection  reflects  several  elements.  First,  the 
growth 
Commission's  more 
projection  results  in  a  lower  revenue  forecast  of 
close  to  ¼%  of  GDP.  Second,  additional  revenue 
from  enhanced 
is  highly 
uncertain and only a small part of it (0.1% vs. the 
planned  ½%  of  GDP)  can  be  taken  into  account. 
Similarly, lower expenditure in light of a potential 
financial  assistance  programme  with  the  EU  and 
the  IMF  (altogether  amounting  to  ½%  of  GDP 
according to the government) cannot be integrated 
in  this  forecast  given  the  considerable  uncertainty 
in this respect. Third, slippages of ½% of GDP are 
anticipated in view of implementation risks related 
the 
to  selected  saving  measures,  notably 
pharmaceutical,  transport  and  education  sectors. 
Finally,  a  number  of  expenditure  items  were  not 
incorporated in the government's  forecast, such as 
the  compensation  of  the  loss  of  the  central  bank 
incurred  in  2012;  these  also  contribute  to  the 
different fiscal outlook by ¼% of GDP. 

in 

is  contained  by 

the 
The  projected  deficit 
assumption that the extraordinary reserve buffer of 
1¾% of GDP, which the government has included 
in  the  2013  budget,  will  be  fully  used  to  offset 
expected slippages. 

Graph II.16.1:Hungary - General government balance 
and public debt

% of GDP

% of GDP

forecast

90

80

70

60

50

40

30

-12

-10

-8

-6

-4

-2

0

2

4

6

05

06

07

08

09

10

11

12

13

14

Headline balance (lhs)
Public debt (rhs)

Structural balance (lhs)

85 

European Economic Forecast, Autumn 2012

The deficit is expected to rise to 3½% of GDP in
2014. This mainly  reflects  the  new  compensation 
scheme  in  the  education  sector  and  the  increasing
interest  expenditure.    Moreover,  the  forecast  also
assumes  that  an  expected  loss  of  close  to  ½%  of 
GDP  of  the  central  bank  in  2013  needs  to  be
compensated  in  2014.  These  negative  effects  are 
foreseen  to  be  only  partly  off-set  by  the  positive
impact of the economic recovery and the expected 
additional gains from structural reforms.

capacities 

borrowing 

recent 
the 

The  baseline  scenario  is subject  to  considerable
legislative  changes have
risks.  First, 
constrained 
of
municipalities; 
therefore  a  potentially more
favourable  budget  balance  of  the  sector  can  be 
expected  than  in  the  baseline.  Second,  increased 
government  efforts  to whiten  the  economy  can
result in higher revenues than assumed. Moreover, 
the  appropriate  substantiation  and  implementation 
of  structural  reform measures  could  result  in
further savings. On the other hand, the increase of 
the   yields   on the  public  securities   cannot  be

excluded. In addition, a potential adverse decision
of 
the
the  European  Court  of  Justice  on 
extraordinary tax of the telecom service providers
introduced 
in
in  2010,  could  also 
considerable  one-off  expenditure.  Finally,  next
year's  loss  of  the  central  bank  is  highly uncertain
and  therefore  poses  a  further  risk for  the  2014 
budget balance.

result 

In 2012, the improvement in the structural balance
of  around  2¼%  of  GDP  is  forecast  to  over-
compensate  the  sharp  deterioration  in  2009  and
2010  so  that  over  the  period  of  2009  to  2012  a
structural  adjustment  of ½% of  GDP  is  expected. 
Following  a  further  improvement  of ½%  of  GDP
in  2013,  the  structural  deficit  is  expected  to
increase again by around 1% of GDP in 2014. 

The debt-to-GDP ratio is anticipated to improve by
3 pps. in 2012 to below 79%, largely thanks to the
revaluation  of  the foreign  exchange  denominated
part of the public debt by a strengthened forint. In 
2013 and 2014, it is forecast to gradually decrease
further to around 77%.

Table II.16.1:
Main features of country forecast - HUNGARY

2011

Annual percentage change

bn HUF Curr. prices
27886.4

% GDP
100.0

92-08
2.5

2009
-6.8

2010
1.3

2011
1.6

2012
-1.2

2013
0.3

2014
1.3

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

14780.1

5797.8

4987.4

2126.7

25470.0

23601.1

26168.6

53.0

20.8

17.9

7.6

91.3

84.6

93.8

Domestic demand
Inventories
Net exports

-

0.4

4.1

-

12.2

12.3

-

2.3

0.2

0.0

-6.6

0.7

-11.1

-17.3

-10.2

-14.8

-4.7

-5.9

-4.6

3.6

-3.0

-0.7

-9.5

-3.5

14.2

12.7

0.9

-3.8

3.3

1.8

0.5

-0.3

-3.6

8.5

6.3

5.0

1.4

-0.5

0.6

1.5

-

-

-

-

0.4

0.7

-0.3

-1.7

-2.5

10.9

11.2

10.0

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

79.8

10.2

81.4

12.0

81.8

10.8

10.4

-4.3

-1.3

-2.5

-2.5

-0.1

-4.6

-0.7

-2.8

-3.5

-4.4

-3.3

-4.1

-0.2

-0.9

-1.7

3.1

3.6

5.2

1.2

1.0

4.3

3.0

2.5

4.0

1.1

3.3

1.1

2.8

4.7

3.0

3.9

2.5

3.2

3.4

1.8

-

-

-

-

-

-

-

-

-

-

-0.8

-2.8

-5.4

-2.0

2.0

0.6

-1.3

-2.0

-0.5

1.3

1.0

10.8

4.5

6.7

2.2

-

4.5

5.6

-1.0

3.9

1.6

4.1

-2.5

-1.1

-2.0

78.4

-0.8

0.1

-0.4

-1.3

4.5

3.9

0.3

-0.5

0.0

0.8

0.3

10.8

1.0

1.0

-3.2

-

4.3

5.3

0.4

5.2

2.6

6.2

-2.9

-1.5

-1.5

77.1

0.4

1.0

0.9

0.2

6.5

6.2

1.0

0.6

0.0

0.8

0.6

10.6

5.5

4.7

0.8

-

3.9

3.9

-0.1

6.2

2.6

6.6

-3.5

-2.6

-2.6

76.8

86

17.  MALTA 

Resilient labour market underpins gradual demand recovery 

Economic recovery following the recession lost 
momentum 

in  2010,  from 

impressive  rebound 

the 
The 
recession  in  2009,  lost  steam  in  2011.  The 
weakening  in  economic  activity  was  particularly 
pronounced  at  the  end  of  2011  and  the  beginning 
of  2012  when  the  economy  was  reported  to  have 
slipped back into technical recession. 

external 

competitiveness 

Economic growth rebounded in the second quarter 
of  2012  and  soft  indicators  suggest  it  is  still 
picking up in the second half of the year. For 2012 
as a whole, real GDP is forecast to expand by 1%, 
driven entirely by net exports, which benefit from 
a 
improved 
remarkably 
sector.  These 
developments  are  projected  to  result  in  a  marked 
improvement 
the  current-account  balance, 
which is forecast to reach a surplus of around 2% 
of GDP, after having recorded a deficit for over a 
decade.  On  the  downside,  domestic  demand, 
including  inventories,  appears  to  be  rather  weak 
and is forecast to be a drag on growth in 2012.  

resilient 

tourist 

and 

in 

Graph II.17.1:Malta - Contributions to GDP growth 
and budget deficit

pps.

forecast

8

6

4

2

0

-2

-4

-6

-8

5
4
3
2
1
0
-1
-2
-3
-4
-5

04

05

06

07

08

09

10

11

12

13

14

HH consumption
GFCF
Changes in inventories
Budget deficit (rhs)

Gov consumption
Net exports
GDP (% y-o-y)

Rebalancing  of  growth  and  moderate 
expansion in 2013-14 

Real  GDP  growth  is  projected  to  pick  up  in  the 
outer  years  of  the  forecast  horizon.  While  it  is 
projected  to  remain  slower  than  the  pre-crisis 
period, reaching 1.6% in 2013 and 2.1% in 2014, it 
will still outpace the euro-area average. 

in  domestic  demand 

is 
A  gradual  recovery 
projected  to  underpin  the  expansion  in  economic 
activity  in  2013-14.  Investment  is  projected  to 
continue  recovering  slowly  on  the  back  of  EU-

funded  projects,  given  the  approaching  end  of  the 
2007-13  programming  period,  as  well  as  the 
construction  of  the  electricity  interconnector  with 
Sicily.  Furthermore,  domestic  banks  are  expected 
to  remain  well-capitalised  and  therefore  well-
positioned to finance higher  credit demand by  the 
corporate  sector.  The  investment-to-GDP  ratio, 
however,  is  expected  to  remain  relatively  low 
compared to the pre-crisis years. 

Household  consumption  is  projected  to  slowly 
recover  in  2013-14,  mostly  on  the  back  of  a 
resilient  labour  market  and  higher  disposable 
income.  Employment  is  expected  to  increase  over 
the  forecast  horizon,  albeit  at  somewhat  more 
subdued  rates  compared  to  2010-11.  Average 
wages  are  also  set  to  continue  growing,  partly 
the  mandatory  wage 
boosted  by 
indexation, 
particularly 
in  2013,  and  partly  reflecting  a 
composition  effect,  as  new  jobs  are  likely  to  be 
created  in  high-skilled  occupations.  Risks  to  the 
projections  are  broadly  balanced  and  relate  to  the 
ability  of  the  labour  market  to  support  a  recovery 
the 
in  consumer  confidence,  as  well  as 
to 
economic  performance 
trading 
the  main 
partners,  namely  the  euro  area  and  South-eastern 
Asia. 

in 

HICP  inflation  climbs  back  above  euro-area 
average 

slightly  higher 

HICP  inflation  is  projected  to  average  2.9%  in 
in  2011.  The 
2012, 
acceleration  is  largely  due  to  the  tourist  sector 
where  price  growth  was  more  dynamic  than 
expected.  

than 

Thereafter,  HICP  inflation  is  forecast  to  moderate 
to  2.2%  in  2013-14.  Deceleration  in  2013  is 
projected to reflect more moderate price dynamics 
in the services and food sectors. Energy inflation is 
forecast  to  strengthen  under  the  assumption  of  an 
increase in electricity prices. Moderation in energy 
and food price dynamics in 2014 is forecast to be 
offset  by  recovering  services  inflation,  thereby 
keeping  overall  HICP  constant.  HICP  inflation  in 
2012-14  is  projected  to  slightly  outpace  the 
average for the euro area. 

87 

European Economic Forecast, Autumn 2012

Budget deficit moderates

are recorded as negative capital asset sales.

In  2011  the  general government  deficit  narrowed 
to  2.7%  of  GDP,  from  3.6%  in  2010,  mainly
driven by higher revenue from the extension of the
2010 scheme for the collection of income tax and 
social security contributions' arrears. 

In 2012 the deficit is projected to narrow slightly,
to  2.6%  of  GDP,  while  the  primary surplus  is
projected  to  increase  by  0.2  pp.  of  GDP.  The 
forecast  includes  the  impact  of  the  measures
adopted  with  the  2012  budget  and  the  January
review  of  spending  allocations.  As  economic
growth in 2012 is driven by net exports, the current
revenue ratio is projected to increase only slightly
compared to 2011 despite, among others, measures 
to  increase  VAT  revenue  collection.  Primary 
current  expenditure  is  set  to  rise  by  0.6  pp.  of 
GDP,  on  the  back  of higher  social  transfers  and
subsidies 
the  national  energy  company
(Enemalta),  while  continued  hiring  restrictions  in
the  public  sector will  help  contain  growth  in  the
wage  bill.  Despite  dynamic  direct  investment  and
the  planned  equity  injection  into Air  Malta,  the
ratio  of  capital  expenditure  to  GDP  is  set  to
decline,  on  account  of  the  proceeds  from  the
concession fee on the local lottery operator, which

to 

In  the  absence  of  consolidation measures,  as  the
budget had  not  been  presented  before  the  cut-off 
date, the deficit in 2013 is expected to widen. The 
current  revenue  ratio  is  projected  to  decline 
slightly,  as  the  increase  in  tax  revenue  related  to
the  pick-up  in  economic  activity  only  partly
compensates for  the  disappearance  of the  one-off 
revenue  projected  for  2012.  Primary  current
expenditure is forecast to drop by 0.3 pp. of GDP,
reflecting  a  continuation  of  the  tight  recruitment
policy  in  the  public  sector  as  well  as  lower 
dynamics  of  social  transfers  from  the  gradual
impact  of  the  2006  pension  reform.  Net  capital
the  planned  additional 
expenditure  (including 
equity injection into Air Malta of 0.6% of GDP) is 
expected to grow by 0.5 pp. of GDP. In 2014, the
deficit  is  projected  to  narrow,  also  due  to  a  lower 
equity injection into Air Malta.  

After  improving  by  1  pp.  of  GDP  in  2011,  the 
structural deficit is set to stabilise in 2012 and, on
a  no-policy-change  basis,  to  improve  by  ¼  pp.  of 
GDP  in  2013  and  by  ½  pp.  of  GDP  in  2014. The
main downside risk to this scenario is related to the
possible need for additional subsidies to Enemalta.

Table II.17.1:
Main features of country forecast - MALTA
2011

Annual percentage change

mio EUR Curr. prices
6499.2

% GDP
100.0

92-08
3.5

2009
-2.4

2010
3.4

2011
1.9

2012
1.0

2013
1.6

2014
2.1

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

3970.7

1344.9

958.8

-

6614.0

6242.0

6074.3

61.1

20.7

14.8

-

101.8

96.0

93.5

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

2.9

-

-

-

-1.1

-1.5

-16.5

-21.1

-9.3

-10.1

-6.0

-3.8

0.3

1.1

-1.7

0.9

13.0

35.2

18.5

13.8

2.9

0.9

-1.7

4.2

4.0

3.2

-14.6

-39.3

2.5

0.1

2.9

0.9

-1.6

2.6

3.6

2.8

5.1

6.5

2.5

6.9

6.4

1.2

6.9

2.4

-0.3

-0.3

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-18.5

-18.0

-15.5

-18.3

67.6

70.9

68.3

-2.8

-3.5

-0.3

-2.7

-3.0

-3.7

-3.8

-7.4

-5.8

-3.9

-3.5

-4.6

-5.4

-5.0

-3.3

-3.6

-0.9

-1.3

-4.1

2.7

2.4

2.9

2.3

5.4

0.7

1.8

2.0

0.2

2.5

0.8

5.8

1.3

3.4

-

-

-

-

-

-

-

-

-

-

-

-

-0.8

2.2

-0.5

-

5.4

3.1

1.1

-0.1

-1.5

2.6

0.9

6.3

1.1

1.0

-1.8

-

2.8

2.9

-1.2

-15.2

2.1

3.0

-2.6

-2.5

-3.5

72.3

0.8

1.2

4.5

-

4.0

4.0

0.9

1.3

0.0

0.3

1.3

6.3

2.1

1.8

1.4

1.0

5.5

-

4.8

4.9

1.8

1.8

0.0

0.3

1.6

6.2

2.0

1.5

-0.7

-0.9

-

2.5

2.2

0.1

-

2.4

2.2

0.1

-15.6

-15.9

1.8

2.7

-2.9

-2.9

-3.2

73.0

1.6

2.5

-2.6

-2.6

-2.8

72.7

88

18.  THE NETHERLANDS 

Slowly emerging from the doldrums 

Contraction in GDP in 2012  

than  2%.  Conversely, 

After a short-lived contraction in the second half of 
2011,  the  Dutch  economy  experienced  a  recovery 
in  the  first  half  of  2012,  with  two  quarters  of 
positive  quarter-on-quarter  growth  of  0.2%.  This 
recovery  was  mainly  driven  by  net  exports  and 
accumulation  of  inventories.  Exports  rebounded 
strongly, with quarter-on-quarter growth averaging 
more 
internal  demand 
excluding  inventories  remained  weak  in  the  first 
half  of  the  year.  Consumption  expenditure  of 
households  has  been  decreasing  now  for  six 
consecutive  quarters  in,  and  has  fallen  to  2003 
levels.  Over  the  year  as  a  whole,  it  is  forecast  to 
fall  by  1.2%.  Several  factors  account  for  this 
protracted decline. Consumer confidence is at very 
low  levels  in  the  wake  of  continued  uncertainty 
about  global  developments,  expectations  of  future 
house price declines and domestic policy plans, in 
particular regarding the housing market. Growth in 
real  disposable  income  has  been  subdued,  partly 
due  to  consolidation  measures,  and  lower  house 
price  induced  capital  losses,  with  a  negative 
feedback to private consumption. 

following 

is  mainly 

investment 

Investment  also  continued  to  decrease  in  the  first 
two  quarters  of 
three 
the  year, 
consecutive  quarters  of  negative  growth  in  2011. 
This 
in 
the  result  of 
construction,  notably  housing,  which  is  estimated 
to  post  a  sharp  drop  of  8%  in  2012.  With 
households  holding  back  on  housing  investment 
decisions, the  stock of unsold homes is rising and 
the  number  of  building  permits  issued  is  at 
historically  low  levels.  Investment  in  equipment 
has  been  slowing  down  considerably,  in  view  of 
the low capacity utilisation rate (which is below its 
long-term  average)  and  weakening  economic 
prospects.  Investment 
transport  equipment 
in 
increased strongly in the second quarter of the year 
due to the anticipated rise in taxation of new cars.  

In  the  second  half  of  2012,  economic  growth  is 
expected  to  slow  down  again  as  a  result  of  the 
combined effect of continued weakness of internal 
demand  and  the  adverse  impact  of  the  current 
global  trade  downturn.  Overall,  real  GDP  growth 
is forecast to turn negative at -0.3% in 2012.  

Domestic  demand  set 
entailing a modest recovery in 2013 and 2014 

remain  weak, 

to 

Growth is forecast to recover gradually in 2013 to 
0.3%. This is due in particular to supportive trade 
developments, since domestic demand is expected 
to  remain  depressed  into  2013.  Domestic  demand 
should  begin  to  pick  up  gradually  in  the  second 
half of the  year, thus  supporting a  moderate pick-
up in 2014, with real GDP increasing by 1.4%. 

Graph II.18.1:The Netherlands - GDP growth and 
contributions

pps.

forecast

5
4
3
2
1
0
-1
-2
-3
-4
-5

06

07

08

09

10

11

12

13

14

Net exports

Dom. demand (incl. invent.)

GDP (y-o-y%)

With  almost  all  determinants  of  household 
consumption  proving  unsupportive,  consumption 
expenditure  is  expected  to  remain  negative  at 
-0.8% in 2013, while turning slightly positive only 
in  2014.  Among  the  main  determinants,  real 
disposable  income  is  likely  to  stay  subdued  over 
the  forecast  horizon.  Real  disposable  income  is 
weighed  down  by  a  higher  tax  burden,  including 
the increase in VAT rates from 19% to 21% as of 1 
October  2012,  as  well  as  lower  employment  and 
strong  wage  moderation  in  the  public  sector 
(excluding  health  care).  Wage  increases  in  the 
private  sector  should  continue  to  be  moderate  as 
labour  market  developments  are  set  to  remain 
subdued  over  the  forecast  horizon.  In  addition, 
pension  premiums  will  be  increased  and  second-
pillar  pension  payouts  will  be  cut  as  of  2013  to 
restore the coverage ratios of pension funds, which 
are  at  historically  low  levels.  In  addition,  a  large 
number  of  households,  which  have  purchased  a 
home  since  the  middle  of  the  early  2000s,  have 
negative  (home)  equity  and  may  adjust  by 
increasing  their  precautionary  savings  in  a  period 
of rising unemployment. 

89 

European Economic Forecast, Autumn 2012 

With  consolidation  measures  also  affecting 
expenditure,  government  consumption  is  forecast 
to  continue  to  decrease  by  -0.5%  in  2013,  after 
-0.1% in 2012.  

Following the marked decline in 2012, gross fixed 
capital  formation  is  forecast  to  fall,  although  less 
sharply,  by  1%  in  2013.  Business  investment  is 
expected to remain weak in 2013. Both the private 
and  the  public  sectors  are  expected  to  continue  to 
reduce investment in 2013, albeit at a slower pace 
than 
in  housing 
construction  falling  by  3%  in  2013.  Only  in  2014 
is  a  moderate  recovery  expected,  supported  by 
better economic conditions and prospects.  

in  2012,  with 

investment 

Net exports are expected to contribute positively to 
economic  growth  throughout  the  forecast  period. 
This  is  not  driven  by  gains  in  competitiveness,  as 
in 2013 and 2014 a loss of exports market share is 
foreseen.  Instead,  this  is  rather  the  result  of  very 
sluggish  import  growth  driven  by  weak  internal 
demand. The projected rise of the current-account 
the  result  of 
surplus 
depressed internal demand.  

thus  predominantly 

is 

The  risks  to  this  macroeconomic  scenario  are 
predominantly  on  the  downside.  A  steeper  fall  in 
house prices would weigh on private consumption 
and 
investment  and  additional  consolidation 
measures  in  the  outer  year  of  the  forecast  could 
negatively  impact  on  domestic  demand.  On  the 
other  hand,  a  bottoming-out  of  house  price 
developments  and  clarity  on  future  housing 
policies  could  improve  consumer  confidence  and 
increase transactions in the housing market. 

Inflation  driven  upwards  in  2012,  but  cooling 
down in 2013 and 2014 

After years of low inflation at around 1%, inflation 
– as measured by the HICP index – accelerated to 
2.5%  in  2011,  mainly  as  a  result  of  increases  in 
energy and processed food prices. In the first four 
months  of  2012,  inflation  stood  at  around  2.9%, 
but  has  since  declined  to  around  2.5%  and  is 
expected to stand at 2.8% for the year as a whole.  

In  2012  and  2013  wages  are  forecast  to  increase 
almost  in  line  with  inflation  (supported  by  the 
prolonged  wage  freeze  in  parts  of  the  public 
sector), but increases in employers' social security 
contributions, mainly due to policy measures, will 
put  upward  pressure  on  labour  costs.  As  a  result, 
nominal unit labour costs are expected to increase 
by  1.3%  in  2013,  after  2.4%  in  2012.  Wage 
increases  in  2014  are  expected  to  be  well  above 
inflation,  also  due  to  a  catching  up  of  salaries  in 
the public sector with private sector wage growth.  

Rising unemployment  

The labour force is expected to increase by 1.3% in 
2012,  as  losses  in  family  disposable  income  have 
pushed  second-income  earners  to  enter  the  labour 
market in  the  first half of 2012. Over the  forecast 
horizon, these developments  are expected to ease, 
although  small  increases  in  the  labour  force  are 
projected 
for  both  2013  and  2014.  Total 
employment  should  decrease  by  a  slight  0.2%  in 
2012,  and  decrease  further  by  0.6%  in  2013.  The 
unemployment rate is foreseen to continue to edge 
higher, to 5.4% in 2012 (after 4.4% in 2011), 6.1% 
in  2013  and 6.2%  in  2014. The  expected  increase 
in  unemployment  results  from  a  combination  of 
weak  current  and  expected  internal  demand  with 
only a gradual pick-up in economic activity, which 
would  lead  to  a  reduced  recourse  to  labour 
hoarding. 

Deficit falling up to 2013  

In  2011,  the  general  government  deficit  fell  to 
4.5% of GDP, after 5.1% in 2010. It is expected to 
improve  further to 3.7% of GDP in 2012, in light 
of  consolidation  measures  that  mainly  increase 
revenues.  Government  revenues  are  expected  to 
increase mainly because of higher tax rates (2 pps. 
increase in the standard VAT in the third quarter of 
the year and an increase in the taxation of banks). 
Expenditure, in particular that related to long-term 
care,  is  also  expected  to  increase,  though  at  a 
slower  pace  than  revenues.  On  the  other  hand, 
interest expenditure is expected to fall further, due 
to historically low interest rates. 

Looking  forward,  the  disinflationary  effects  of 
weak  domestic  demand  and  decreasing  oil  prices 
are  outweighed  by  the  lagged  upward  pressures 
from the increase in the standard VAT tax rate. As 
a result, inflation is likely to fall only marginally to 
2.4% in 2013 and to ease further to 1.6% in 2014. 

Despite  weak  economic  activity,  the  deficit  is 
expected to fall to 2.9% of GDP in 2013 in light of 
additional consolidation measures, again mainly on 
the  revenue  side,  and  a  strong  increase  in  social 
contributions.  These  projections  take  into  account 
the  budget  for  2013,  including  the  amendments 

90 

Member States, The Netherlands

proposed  by  the  parties  currently  negotiating  the
formation of a new government.

Graph II.18.2:The Netherlands - Public finances

% of GDP

% of GDP

forecast

6

5

4

3

2

1

0

-1

-2

-3

90

80

70

60

50

40

30

20

10

0

06

07

08

09

10

11

12

13

14

General government debt

General government deficit (rhs)

Under  the  assumption  of no  policy  changes,
government  expenditure  is expected  to  outpace 
revenue  in  2014,  implying  an  increase  in  the 

deficit to 3.2% of GDP. This also reflects the fact
that  the  caretaker  government  planned  to  partly
offset  the  rise  in  indirect  taxes  by  a  decrease  in 
direct 
offsetting
consolidation measures.  At  the  cut-off  date  of  the
forecast, the new government had not been formed 
and the plans for 2014 and beyond were therefore 
not known.

taxes  without 

defining

The  structural  balance  is  expected  to  improve
strongly  in  2012  and  2013  by  over  1  pp.,  and  to
deteriorate in 2014 by around 0.7 pp.

After recording gross government debt of 65.5% of
GDP in 2011, the debt ratio is expected to steadily
increase to 68.8% of GDP in 2012, 69.3% in 2013
and 70.3% in 2014. This mainly reflects persistent
deficits,  bilateral  loans  to  programme  countries,
EFSF  and  ESM  disbursements  and  the  modest
economic outlook.

Table II.18.1:
Main features of country forecast - THE NETHERLANDS

2011

Annual percentage change

2012
-0.3

2013
0.3

2014
1.4

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

bn EUR Curr. prices
602.0

% GDP
100.0

92-08
2.6

2009
-3.7

2010
1.6

271.1

168.2

106.7

34.3

499.6

445.8

607.2

45.0

27.9

17.7

5.7

83.0

74.1

100.9

Domestic demand
Inventories
Net exports

2.1

2.6

3.1

4.5

6.0

6.0

2.5

2.3

0.0

0.4

-2.1

5.0

-12.0

-16.4

-7.7

-7.1

-4.0

-2.1

-0.4

-1.1

0.3

0.7

-7.2

-4.6

11.2

10.2

2.5

-1.0

1.2

1.4

2011
1.0

-1.0

0.1

5.7

9.2

3.9

3.6

3.5

0.6

-0.1

0.5

2.0

4.4

0.5

1.2

3.5

2.5

3.7

4.6

1.5

4.5

-1.1

-0.6

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

61.1

60.8

63.1

65.5

15.3

12.3

10.5

11.6

-1.8

-3.4

-4.1

-3.9

-1.4

-4.1

-4.0

-3.5

-1.3

-5.6

-5.1

-4.5

-0.8

-0.6

-0.4

5.2

2.3

2.2

6.0

5.7

5.4

1.0

0.1

1.1

0.9

6.3

7.5

3.2

5.1

2.7

4.5

1.8

1.2

2.5

8.1

8.3

7.9

0.0

0.4

5.3

1.3

0.1

0.2

-

-1.2

-0.1

-3.0

3.5

3.8

2.9

-0.2

-1.1

-0.2

1.0

-0.2

5.4

2.4

2.4

1.0

12.5

1.5

2.8

-0.2

8.8

9.2

8.9

-3.7

-2.2

-2.2

68.8

-0.8

-0.5

-1.0

0.9

2.5

1.7

0.5

-0.7

0.1

0.9

-0.6

6.1

2.1

1.3

-0.2

12.8

1.4

2.4

-0.7

9.1

9.8

9.5

-2.9

-1.1

-1.1

69.3

0.4

0.5

2.6

3.4

4.7

4.5

1.4

0.8

0.0

0.6

-0.1

6.2

2.3

0.8

-0.4

13.4

1.3

1.6

-0.5

9.0

9.8

9.5

-3.2

-1.8

-1.8

70.3

91

19.  AUSTRIA 

A gradual return to normality 

A short-lived upswing in early 2012 

In  the  first  quarter,  GDP  growth  reached  0.5%, 
underpinned  by  net  exports  on  the  demand  side 
and  manufacturing 
side. 
on 
Employment  growth  remained  dynamic.  Real 
labour  incomes  of  households  posted  an  increase 
of 1.2% year on year, after stagnating in 2011 due 
to  higher  inflation.  Both  consumer  and  business 
sentiment showed signs of recovering. 

supply 

the 

In  the  second  quarter  manufacturing  value  added 
slowed down. While export growth was sustained, 
it  was  largely  neutralised  by  an  increase  in 
imports.  GDP  grew  by  only  0.1%.  Hiring  in 
manufacturing  ceased,  while  sentiment  indicators 
embarked  on  a  downward  path.  Profits  and 
investment growth weakened. Despite increases in 
real  incomes  and  employment,  consumer  demand 
stalled. 

Graph II.19.1:Austria - GDP growth and 
contributions, output  gaps

pps. 

% of  pot. GDP

forecast

6

3

0

-3

-6

6

3

0

-3

-6

05

06

07

13

14

11

12

08
10
09
Output gap (rhs)
Net exports
Dom. demand (incl. inventories)
GDP growth (y-o-y%)

Gradual recovery in 2013 

Economic  activity  is  set  to  remain  weak  in  late 
2012  and  well  into  2013.  Sentiment  has  fallen 
below its October 2011 low. This is likely to deter 
an  upswing  in  investment  and  consumption.  They 
are  expected  to  start  strengthening  only  later  in 
2013.  GDP  growth  is  projected  at  just  0.8%  in 
2012  and  below  1%  in  2013  before  regaining 
momentum  in  2014  as  confidence  is  rebuilt.  Net 
exports  are  foreseen  to  be  an  important  driver  of 
growth,  although  their  relative  weight  is  likely  to 
be less in 2014 as an expected pick-up in domestic 
demand induces stronger import growth. 

92 

Private  consumption  is  set  to  stay  sluggish  in  the 
upcoming  quarters,  since  a  rapid  recovery  of 
household  confidence  is  unlikely.  Employment 
growth is slowing and the unemployment rate has 
reached 4.5% in August 2012 – 0.7 pp. higher than 
a  year  earlier.  Negotiated  wages  rose  by  3.4% 
year-on-year  in  the  third  quarter  of  2012.  This 
limits the scope for employment gains in 2012. 

Manufacturers'  orders  weakened  further  in  2012 
flat.  Thus 
and  capacity  utilisation 
to  pick  up 
investment  activity 
significantly in the near future. 

is  unlikely 

stayed 

The  balance  of  risks  seems  neutral  to  mildly 
positive.  While  downside  risks  stemming  from 
weaker  foreign  demand  cannot  be  discounted, 
Austrian  exporters  could  well  benefit 
from 
improving 
in  neighbouring 
import  demand 
countries. Consumption may surprise on the upside 
as the trends in unemployment are associated with 
rising  labour  supply  and  are  not  a  threat  to  the 
currently employed. Real wage growth is likely to 
has 
stay 
accumulated  significant  savings  over  the  recent 
years  and  should  not  have  financing  difficulties, 
provided  companies  keep  cost  pressures  at  bay. 
Private  credit  growth  has  weakened  but  remained 
positive  and  financing  conditions  are  relatively 
favourable. 

positive.  The 

corporate 

sector 

Headline inflation has declined from 3.9% y-o-y in 
November 2011, to 2.8% in September. There was 
major disinflation in energy and food prices in the 
first half of 2012 as well as a deceleration of core 
inflation (HICP excluding energy and unprocessed 
food) until September when both core and headline 
inflation picked up by 0.5 pp. Inflation is expected 
to stay just below 2% in 2013-14, assuming further 
disinflation  of  energy  prices  and  contained 
inflationary pressures in line with an only gradual 
recovery of demand. 

Fiscal  consolidation  continues,  but  at  a  slower 
pace 

Fiscal  consolidation  in  2012  will  be  hampered  by 
past and new measures for the banking system. On 
top of budgeted capital transfers to ÖVAG and KA 
Finanz,  of  0.6%  of  GDP  in  2012,  additional 
support is required for Hypo Alpe Adria bank and 
to  a  lesser  extent  for  KA  Finanz.  Although  its 

Member States, Austria

impact risks to be higher than expected, part of the
cost  (0.2%  of  GDP)  is  projected  to  arise  in  2012, 
while the remainder (0.7% of GDP) will be borne
in 2013. As a result, the general government deficit
is  projected  to  edge  up  to 3.2%  of  GDP.  The 
combined 
effect  of  discretionary measures
approved  in  March  and  better-than-expected  tax 
revenues has helped contain the rise in the deficit. 

For 2013, despite weaker GDP growth, the decline
in the deficit below 3% seems secure. Most of the
consolidation  measures  for  2013-14  have been
approved  already  before  the 2013 Budget.  On  the
revenue  side,  consolidation  is mainly  based  on  a
change  in  real  estate  taxation  (0.1%)  and  the
closing of loopholes in VAT collection (0.1%). For 
2013  the  government  relies on  a  tax  repatriation 
agreement  with Switzerland,  whose  effect  may 
turn out lower than government projections. On the
expenditure  side,  the  bulk  of  the  consolidation  is
expected 
in  pensions  and
unemployment  allowances  (0.3%)  and  savings  in
federal  administration  (0.1%),  including  a  salary
freeze  for  civil  servants.  Additional  spending  on
universities  (0.1%)  will  partly  offset  some  of  the
expenditure cuts.

through  reductions 

Fiscal  consolidation  is  expected  to  continue  in
2014 and the deficit is projected to decline to 1.9%
of GDP due to an acceleration of economic activity 
and the impact of the stability package approved in
2012. Two  thirds  of  the  consolidation for  2014
would come from savings on the expenditure side.

After an estimated increase from 74.6% of GDP in
2012  to  75.9%  of  GDP  in  2013,  the  debt  ratio  is
projected to decrease to 75.1% in 2014. 

6

5

4

3

2

1

0

-1

-2

Graph II.19.2:Austria - General government
gross debt and deficit

% of GDP

% of GDP
forecast

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Gross debt (rhs)

Deficit (lhs)

85

80

75

70

65

60

55

50

Table II.19.1:
Main features of country forecast - AUSTRIA
2011

Annual percentage change

bn EUR Curr. prices
300.7

% GDP
100.0

92-08
2.4

2009
-3.8

2010
2.1

2011
2.7

2012
0.8

2013
0.9

2014
2.1

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

163.6

56.7

64.5

25.0

172.3

162.3

297.0

54.4

18.9

21.4

8.3

57.3

54.0

98.8

Domestic demand
Inventories
Net exports

1.6

2.2

1.4

1.6

6.0

4.8

2.4

1.7

0.1

0.6

1.1

0.6

-7.8

-10.6

-15.6

-13.3

-4.5

-1.0

-0.9

-2.1

1.7

0.2

0.8

6.0

8.7

8.8

3.2

1.1

0.6

0.4

0.7

0.1

7.3

12.1

7.2

7.2

1.1

1.9

0.6

0.3

0.2

1.3

1.6

1.5

1.5

1.1

0.7

0.7

0.5

0.8

0.9

1.2

3.9

3.4

0.8

0.7

-0.2

-0.2

1.0

4.2

1.4

4.8

0.6

2.8

4.2

2.5

0.5

4.4

1.3

-1.5

 Employment
 Unemployment rate (a)
 Compensation of employees/f.t.e.
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

16.1

69.2

72.0

72.4

64.3

14.2

12.6

-1.6

-1.8

-2.9

-1.2

-2.3

-2.8

-3.4

-2.3

-2.4

-2.8

-3.7

-2.5

-1.9

-1.1

-1.1

-2.4

-4.1

-4.5

-2.5

-0.2

-0.6

-0.2

3.4

2.8

0.0

0.1

2.0

1.5

1.5

1.6

2.8

1.7

3.5

0.4

2.7

3.5

2.3

1.1

2.2

3.6

1.0

4.9

1.0

-

-

 Note : Contributions to GDP growth may not add up due to statistical discrepancies.

0.3

1.1

4.5

2.9

3.2

1.1

12.6

2.0

2.4

-0.3

-2.1

1.1

0.2

-3.2

-2.9

-2.6

74.6

0.5

0.7

4.7

2.1

1.9

0.3

12.5

1.6

1.8

-0.1

-2.0

1.2

0.7

-2.7

-2.3

-2.1

75.9

1.1

1.3

2.9

5.2

5.9

5.6

2.0

1.5

0.2

0.4

0.9

4.2

1.9

0.8

-1.4

12.7

2.2

1.9

0.4

-1.8

1.6

1.2

-1.9

-1.8

-1.8

75.1

93

20.  POLAND 

Growth slows down as domestic demand falters 

Economic activity loses steam  

financing 

After  a  continued  rebound  in  2011  driven  by  a 
revival of international trade, inflows of EU funds 
and an improving labour market, economic growth 
decelerated to 3.1% y-o-y in the first half of 2012. 
Activity  was  mainly  driven  by  a  positive 
contribution  of  external  trade  and,  to  a  lesser 
extent,  by  weakening  domestic  demand. 
In 
particular,  worsening 
conditions, 
stabilising  company  profits  and  deteriorating 
demand prospects limited the expansion of private 
investments.  At  the  same  time,  public  outlays 
peaked  in  the  first  quarter  of  2012  when  major 
transport  infrastructure  projects  were  completed, 
resulting  in  a  slowdown  in  public  investment 
thereafter. Private consumption remained sluggish, 
labour  market  prospects  worsened  and 
as 
consumer  moods  deteriorated,  while 
fiscal 
consolidation  was  a  drag  on  public  spending. 
Exports  remained  relatively  robust,  not  least  as  a 
lagged effect of the deprecation of the currency in 
2011,  while  restricted  domestic  demand  limited 
growth of imports.   

to  continue 

In the second half of 2012, the Polish economy is 
expected 
its  slowdown.  Weaker 
external demand is set to hamper export growth. In 
addition,  a  further  deterioration  in  consumer  and 
producer  confidence  is  projected  to  limit  private 
investment  expenditure,  employment  growth  and 
private  consumption.  These  developments  are 
expected  to  result  in  real  GDP  growth  slowing  to 
1.8% y-o-y in the second half of the year, leading 
to an annual growth of 2.4% in 2012. 

Private  demand  growth 
falters  as  sluggish 
external  demand  prospects  and  stagnating 
labour market take its toll 

the  global  slowdown  and 
The  fallout  from 
deteriorating  domestic  moods  are  expected  to 
shape the prospects of the Polish economy over the 
forecast  period.  The  economy  is  likely  to  face 
external  headwinds  reflected  in  sluggish  domestic 
demand growth in 2013 and a marginal rebound is 
anticipated  only  in  2014.  Real  GDP  is  therefore 
forecast to increase by 1.8%  in 2013 and 2.6% in 
2014.  In  2013,  the  contribution  of  domestic 
demand  to  growth  is  likely  to  be  seriously 
hampered  by  weaker  labour  market  conditions, 
worsening consumer and producers' sentiment and 

94 

slowing  inflows  of  EU  funds.  In  2014  private 
investment  and  private  consumption  are  expected 
to  inch  up  against  the  background  of  a  reviving 
global environment. 

Public investment growth is set to turn negative, as 
major  infrastructure  projects  were  finalised  in  the 
beginning  of  2012  and  further  public  spending  is 
expected  to  be  curbed  due  to  fiscal  consolidation 
needs and the end of the EU financial perspective 
for  2007-13.  Private  gross  fixed  capital  formation 
is  forecast  to  slow  in  2013  after  a  temporary 
rebound  in  2011-12.  In  particular,  the  corporate 
sector  is  set  to  delay  investments  as  a  result  of 
uncertain  demand  prospects  and  weakened  global 
sentiment. However, the expected improvement in 
external demand in 2014 is likely to revive private 
investment  as  large  and  medium-sized  companies 
have  sufficient  cash  at  their  disposal  and  credit 
supply is set to accelerate.  

9

6

3

0

-3

Graph II.20.1:Poland - GDP growth and 
contributions

pps.

forecast

04

05

06

07

08

09

10

11

12

13

14

Net exports (lhs)
Domestic demand (lhs)
Inventories (lhs)
GDP growth (y-o-y%), (lhs)

fuel 

income  and 

growth.  Moreover, 

Sluggish real wage growth and marginally positive 
employment  growth  is  not  likely  to  strengthen 
strong  private 
disposable 
consumption 
consumer 
confidence,  which  is  expected  to  wane  further, 
increased  household  savings 
might  result 
constraining  domestic  demand  as  well.  Only 
towards the end of the forecast horizon improving 
labour  market  conditions,  recovering  confidence 
and  cuts  in  VAT  rates  are  set  to  result  in  an 
accelerating private consumption.  

in 

The impact of external trade on growth is likely to 
be  positive,  though  declining,  over  the  entire 
forecast  horizon.  Decelerating  external  demand  is 
set  to  hamper  exports,  yet  the  slump  in  domestic 
import 
demand  will  result 

in  even  stronger 

demand 

compression  in  2013.  In  2014  the  rebounding 
external 
costs 
and 
competitiveness  are  likely  to  fuel  export  growth. 
Accelerating  domestic  demand,  however, 
is 
expected  to  stimulate  imports,  partly  outweighing 
stronger exports.  

improving 

than 

imports  due 

The  current-account  deficit  improved  in  2011  to 
4.5%  of  GDP,  following  a  stronger  increase  in 
exports 
to  a  depreciating 
currency.  This  trend  is  expected  to  continue,  with 
the  current-account  deficit  reaching  3.7%  of  GDP 
in  2014.  This  is  a  result  of  depreciation  and 
sluggish  domestic  demand  growth  limiting  trade 
deficits  and  moderate 
in  current 
the 
transfers,  somewhat  counterbalanced  by 
growth  of  income  transfers  linked  to  increased 
holdings of sovereign debt by foreigners. 

increases 

a 

the 

upside, 

This scenario is subject to broadly balanced risks. 
On 
stronger-than-expected 
depreciation  would  further  boost  exports  and 
enhance  import  substitution.  On  the  downside, 
in  business  and 
more  profound  deterioration 
consumer  confidence  could  adversely  affect 
private investment and consumption.  

Member States, Poland 

forecast  to  freeze  employment  growth,  especially 
in  construction,  in  2013.  It  is  set  to  rebound 
moderately  in  2014  on  the  back  of  an  improving 
global  outlook,  leading  to  a  marginal  fall  in  the 
unemployment  rate  to  10.3%  (from  10.5%  in 
2013) at the end of the forecast horizon.   

Inflation bound to decrease  

HICP  inflation,  driven  up  to  3.8%  in  2012  by  the 
depreciation  of  the  zloty,  high  commodity  prices 
and  the  impact  of  the  increases  in  administered 
prices, is set to reverse to 2.6% in 2013, mainly on 
account  of  base  effects,  moderate  growth  of 
domestic  demand  and  contained  wage  pressure.  It 
is  expected  to  moderate  further  to  2.4%  in  2014, 
reflecting lower commodity prices, relatively weak 
domestic  demand  and  cuts  in  indirect  taxes.  After 
some  acceleration  over  2010-11,  limited  labour 
demand is expected to lead to some moderation in 
nominal  labour  unit  costs  in  2012-13,  improving 
export prospects. Looking ahead, the modest pick-
up 
the  economic  activity  and  gradual 
improvement  of  employment  prospects  are  likely 
to  fuel  moderate  wage  growth  in  2014,  affecting 
unit labour costs. 

in 

Credit  growth  remains  sluggish  despite  strong 
financial position of banks  

Fiscal  consolidation  continues  at  a  slowing 
pace 

Poland's  banking  sector  has  continued  to  increase 
its  profitability  and  capital  adequacy  in  the  first 
half of 2012. Aggregate capital adequacy ratio for 
the  financial  sector  grew  to  13.9%  at  the  end  of 
August  2012  (compared  to  the  8%  regulatory 
threshold  set  for  individual  banks)  and  net  profits 
increased  by  2.5%  y-o-y  over  January-August 
2012.  However,  credit  growth,  especially  for 
households, remained lethargic as banks reacted to 
the  tightened  supervisory  framework  and  the 
relatively  high  share  on  non-performing  loans  in 
the  consumer  credit  segment  (18.3%)  Going 
forward,  credit  regulations  and  an  uncertain 
demand  outlook  might  induce  banks  to  remain 
lending  activities,  which 
cautious 
ultimately prevent credit supply to support private 
consumption and investment.  

their 

in 

Labour market revival moderates  

Despite an expected rise in employment of 0.3% in 
2012,  the  unemployment  rate  is  set  to  moderately 
to  10.1%,  as  labour  supply  growth 
increase 
growth.  Deteriorating 
outstrips 
employment 
falling  confidence  are 
external  demand  and 

After the peak at 7.8% of GDP in 2010, the general 
government  deficit  started  to  decrease  in  2011, 
when  it  fell  sharply  to  5%;  it  is  projected  to 
continue to fall over the forecast period, albeit at a 
slowing pace.  

In  2012  the  deficit  is  expected  to  decrease  to 
slightly  below  3.4%  of  GDP  due  to  the  2011 
package  of  structural  consolidation  measures,  as 
well  as  measures  included  in  the  2012  Budget 
Law. On the revenue side, these measures include 
a  change  to  the  pension  system  consisting  of  the 
retention  of  part  of  the  pension  contribution 
previously earmarked to the private schemes in the 
first public pillar, a temporary (3 years) increase in 
the  VAT  rate  (by  1 pp.)  and  in  excise  duty  on 
tobacco  (by  4  pps.),  the  abolition  of  some  VAT 
and  excise  duty  exemptions  and  a  freeze  in 
Personal  Income  Tax  (PIT)  thresholds.  Those 
reforms  were  complemented  in  2012  by  a  2  pps. 
increase 
rate,  an 
in  disability  contribution 
introduction  of  a 
tax  on  copper  and  silver 
extraction  and  further  minor  changes  in  excise 
duty regulations. As a result of those measures and 
additional  windfall  revenues  from  dividends  of 

95 

European Economic Forecast, Autumn 2012

and 

enacted 

existing 

state-owned  companies,  revenue-to-GDP  ratio  is 
projected to increase from 38.5% in 2011 to 39.4%
in  2012.  On  the  expenditure  side,  structural
measures which have remained in force from 2011 
include: an expenditure rule limiting growth in all 
newly 
discretionary
expenditure items to 1 pp. over the inflation rate, a 
further  freeze  in  the  wage  fund  of  public  sector 
employees and some minor cuts in social spending.
These  measures  have been  complemented  by a
decrease  in  complementary  direct  payments  to 
farmers 
the  Common
the  framework  of 
Agricultural  Policy.  Moreover,  after  the  peak  in
first  quarter  of  2012,  the  government  sharply  cut
public 
investment  expenditure.  Consequently,
public  investment  spending  is  forecast  to  fall  in
nominal terms and the overall expenditure-to-GDP
ratio to decrease from 43.5% in 2011 to 42.8% in
2012.

in 

In 2013, the deficit is expected to continue to fall. 
On  the  revenue  side,  the  main  deficit-reducing 
measures  include  revenues from CO2  emission 
rights auctions, a further increase in excise duty on
tobacco  by  5  pps.,  a  continued  freeze  in  PIT 
thresholds and other changes in PIT and Corporate
Income Tax (CIT). On the other hand, the share of 

pension  contributions  retained  in the  public  pillar 
will  start  to  decrease  in  accordance  with  the
original schedule  (from  5.0%  to  4.5%  of  gross 
wages).  The  main  structural  measures  decreasing 
expenditure  are  a  further  freeze  in  the  wage  fund
of  public  sector  employees  and  the  start  of  a
gradual  increase  in  retirement  age.  The  headline
deficit  is  expected  to  fall  to  3.0%  due  to  slowing 
but  positive  GDP  growth and  a  further  sharp
decrease in public investment.

the 

character 

structural 

Given 
of most
implemented reforms and a negative but relatively
stable  output  gap,  the  structural  deficit  is  set  to
follow the path of the headline deficit, falling from
5.0% in 2011 to 1.7% in 2014.

Thanks to the appreciation in the zloty's exchange
rate,  the  further  reduction  in  the  headline  deficit
and  the  government's  prudent  debt management
strategy, the general government debt is projected 
to  fall from  56.4%  in  2011  to  55.5%  in  2012.
Subsequently,  it  is forecast  to  slightly  increase  to
56.1%  in  2014.  The  projected  debt  figures  are, 
however,  subject  to  considerable  uncertainty  due
to  high  exchange-rate  volatility  affecting  the  debt
valuation.

Table II.20.1:
Main features of country forecast - POLAND
2011

Annual percentage change

bn PLN Curr. prices
1523.2

% GDP
100.0

92-08
4.6

2009
1.6

2010
3.9

2011
4.3

2012
2.4

2013
1.8

2014
2.6

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

932.8

274.8

309.7

106.5

688.7

706.3

1455.3

61.2

18.0

20.3

7.0

45.2

46.4

95.5

Domestic demand
Inventories
Net exports

4.4

3.5

7.6

-

10.6

11.5

4.7

4.9

0.1

-0.4

2.0

2.1

-1.2

-10.8

-6.8

-12.4

0.1

1.4

-2.5

2.7

3.1

4.1

-0.4

-3.3

12.1

13.9

4.0

2.6

2.0

-0.7

2.5

-1.7

9.0

9.7

7.7

5.5

3.1

3.0

0.4

0.9

-

-

1.0

0.5

0.4

4.7

9.6

3.5

8.2

9.7

14.3

15.7

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

50.9

56.4

11.8

54.8

-5.0

-5.0

-2.3

-5.0

-7.7

-8.0

-7.4

-1.4

-8.0

-8.0

-7.9

-0.1

-3.1

-2.3

-1.0

-1.8

-2.1

-1.6

-3.1

-3.8

-4.5

-1.9

-2.3

-2.4

-1.9

-1.4

3.1

4.0

3.7

1.4

9.0

4.0

2.2

8.5

2.7

1.3

0.2

2.8

3.9

4.4

0.7

-

-

-

-

-

-

-

1.6

-0.2

1.7

5.5

3.0

-0.2

2.4

1.3

-0.3

1.4

0.3

10.1

3.5

1.4

-0.8

1.4

2.2

3.8

-2.4

-1.8

-3.9

-2.0

-3.4

-2.9

-2.9

55.5

1.5

1.7

-2.8

2.5

4.1

2.1

1.8

0.7

0.2

0.9

0.1

10.5

3.4

1.7

-0.5

1.8

2.1

2.6

-0.5

-1.2

-3.3

-1.8

-3.1

-2.0

-2.2

55.8

2.1

3.1

1.4

6.8

6.3

5.2

2.5

2.1

0.0

0.5

0.4

10.3

4.6

2.3

1.0

2.2

1.3

2.4

-1.7

-1.4

-3.7

-2.4

-3.0

-1.7

-1.7

56.1

96

21.  PORTUGAL 

Faster-than-expected rebalancing towards net exports 

Swift rebalancing of the economy  

In  the  first  half  of  2012,  real  GDP  fell  by  2.8% 
y-o-y,  in  line  with  the  spring  forecast.  While 
domestic  demand  deducted  7.1 pps.  from  growth, 
net  trade  added  4.3  pps.  due  to  the  buoyancy  of 
exports  which  grew  by  6.1%  despite  a  worsening 
external  environment.  Following  a  period  of 
stabilisation in the first half of this year, economic 
sentiment  fell  markedly  across  the  board  in 
September, with service-sector confidence hitting a 
record low.  

investment  growth  rates  as  of  mid-2013 
is 
maintained.  Negative  carry-over  effects  will  also 
affect the annual growth of other domestic demand 
components. Continued  weak domestic demand  is 
likely  to  weigh  on  employment  in  2013  and  the 
unemployment  rate  is  expected  to  peak  at  above 
16%.  Stronger  employment  gains  are  expected 
only  in  2014,  when  the  economy  is  set  to  gain 
traction  due  to  accelerated  export  activity.  As  a 
result  of  ample  slack  in  the  economy,  price 
pressures  should  remain  weak  even  when  the 
economy is on a recovery path in 2014.  

A  strong  fall  in  unit  labour  costs  this  year  is 
expected  to  boost  external  price  competitiveness 
and export market shares, partly compensating for 
the deteriorating external environment. Exports are 
therefore  forecast  to  rise  by  about  4½%  in  this 
year,  well  above  what  might  have  been  expected 
from  the  strength  of  external  demand.  Domestic 
demand  is  expected  to  shrink  further  due  to  the 
effects  of  fiscal  consolidation  and  the  continued 
weakness  of  the  labour  market.  Overall,  a  3.0% 
fall  in  real  GDP  is  foreseen  for  this  year, 
unchanged  from  the  fifth  Programme  review 
projections and slightly below the spring  forecast. 
Unemployment 
the 
remainder  of  the  year,  reaching  an  average  of 
15½% of the labour force in 2012. HICP inflation, 
which is strongly affected by increases in indirect 
taxes  and  administrative  prices,  is  expected  to 
remain on a downward path, and to average 2.9% 
in 2012. 

to  rise  further 

is  set 

in 

Economy to emerge from recession in 2013 

The  growth  outlook  for  2013  has  worsened  since 
the  spring  forecast,  with  additional  budgetary 
consolidation weighing on domestic demand and a 
further  downward  revision  of  external  demand 
curbing  exports.  Private  consumption  is  set  to 
suffer from the projected fall in disposable income 
following  the  increase  in  personal  income  tax  in 
2013,  and  is  now  forecast  to  decline  by  1¾%  in 
2013 (down from -1% in the spring forecast). The 
sharp contraction in domestic consumption should 
have an adverse impact on gross fixed investment, 
which is projected to decline by 4½% in 2013. The 
marked downward revision compared to the spring 
forecast is mainly due to the negative carry-over of 
the large drop of investment in the second quarter 
of  2012,  although  the  assumption  of  positive 

Graph II.21.1:Portugal - Current-account balance

% of GDP

forecast

10

5

0

-5

-10

-15

-20

01 02 03 04 05 06 07 08 09 10 11 12 13 14

Net exports of goods

Net exports of services

Net primary income

Net current ransfers

Current account

The  external  balance  should  move  into  positive 
territory already in 2012. However, the adjustment 
of  the  current-account  balance  will  be  slower  due 
to  further  expected  rises  in  the  primary  income 
deficits  linked  to  the  still-very-high  level  of 
foreign  indebtedness.  The  current-account  deficit 
is projected to reach 1½% of GDP in 2014, down 
from 10% in 2010. 

Risks  to  the  macroeconomic  outlook  are  tilted  to 
the downside. Continued tensions in the euro area 
and  particularly  neighbouring  Spain  have  the 
potential to spill over to Portugal through the trade, 
financial  market  or  confidence  channels.  There  is 
also  a  heightened  risk  of  adverse  macro-fiscal 
feedback  loops,  as  the  composition  of  the  fiscal 
adjustment  has  moved  strongly 
the 
revenue side. 

towards 

Adjusting 
rebalancing economy  

fiscal 

consolidation 

to 

the 

The  faster-than-expected  rebalancing  of  GDP 
away  from  domestic  demand  towards  net  exports 
and  the  more  intense  labour  shedding  have  taken 
their  toll  on  tax  revenues  and  the  social  security 

97 

European Economic Forecast, Autumn 2012

budget  in  2012.  Moreover,  the  fall  in  per  capita
income has led to a shift to lower personal income
tax  brackets  and  tilted  consumption  towards  less
tax-yielding  goods.  By  contrast,  expenditure  is
developing favourably,  particularly  on  the  public
wage  bill.  Moreover,  lower  net  interest  payments,
the  reprogramming  of  EU  structural  funds  and, 
possibly,  one-off 
from  an  airport
revenues 
concession should partly offset revenue losses.  

For  the  remainder  of  the year,  the government is
taking  additional  measures  to  constrain the  2012 
deficit  to  5.0%  of  GDP,  including  the  freezing  of 
some  not-yet-initiated  investment  projects  and
frontloading some  of  the  2013  budget measures.
There  are,  however,  downside  risks  to  the  fiscal
projection, namely the classification of the sale of
the  airport  concession  as  a  deficit-reducing 
measure  by  the  statistical  authorities  and  possible
delays  in  the  implementation  of  the  additional
measures.

Additional  consolidation  efforts  of  about  3%  of 
GDP will be adopted in 2013 to meet the 4.5% of 
GDP  deficit  target.  The  draft  budget  submitted  to
parliament includes, inter alia, on the expenditure 

Table II.21.1:
Main features of country forecast - PORTUGAL

side,  further  decreases  in  the  wage  bill  and
intermediate  consumption  and  a  reduction  in
expenditure  on  social  transfers.  On  the  revenue
side,  the  measures include  a  structural  reform  of 
the personal income tax through a reduction in the
number  of tax  brackets  and  the  introduction  of  a
special  surcharge,  increases in  excise  duties  and
the  reduction  of
tax  expenditure.  The  2013
consolidation effort is now strongly tilted towards
the  revenue  side,  and  downside  risks  to fiscal
projections may  arise  from  a  stronger-than-
expected  deterioration  of  domestic  demand  that
could reduce the expected yield from the measures. 

to 

adopt

The 2014 fiscal projections include the authorities'
expenditure-reducing 
commitment 
measures amounting  to 1¾% of  GDP.  A detailed
plan will be presented during the next Programme
review and this will be fully specified in the 2013 
is
Stability  Programme.  The  budget  deficit 
projected to reach 5.0% of GDP in 2012, 4.5% in
2013  and  2.5%  in  2014.  The  adjusted  fiscal  path
would ensure a steady decline of the debt-to-GDP
ratio  over  the  medium-term  after  peaking  slightly
below 124% of GDP in 2013.

2011

Annual percentage change

bn EUR Curr. prices
170.9

% GDP
100.0

92-08
2.1

2009
-2.9

2010
1.4

2011
-1.7

2012
-3.0

2013
-1.0

2014
0.8

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

113.3

34.3

30.9

8.8

60.7

67.2

164.6

66.3

20.1

18.1

5.2

35.5

39.3

96.3

Domestic demand
Inventories
Net exports

2.4

2.3

1.9

3.9

5.7

5.8

1.9

2.5

0.2

-0.6

-2.2

4.7

-8.6

-13.2

-10.9

-10.0

-3.4

-2.5

-1.1

0.7

2.1

0.9

-4.1

-4.3

8.8

5.4

2.2

0.7

0.1

0.6

-3.8

-3.7

-12.1

-14.1

7.7

-5.2

-2.1

-5.7

-0.3

4.4

3.9

2.8

6.6

0.4

5.6

1.4

-2.6

-1.5

-1.5

12.0

12.9

10.6

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

108.1

-10.0

-10.0

-10.8

-10.2

-10.4

10.9

58.7

83.2

93.5

10.2

10.0

-6.6

-4.4

-9.7

-9.8

-7.2

-6.2

-0.8

-2.1

-8.5

-0.9

-8.4

-4.4

-8.8

-9.1

-3.2

-6.1

-9.6

-8.4

-5.1

-1.3

-1.6

-0.7

-2.6

-8.2

-4.2

3.9

3.5

0.2

0.9

1.1

1.4

5.1

0.1

0.7

3.6

0.1

3.1

2.2

-

-

-5.9

-3.5

-14.1

-10.3

4.3

-6.6

-3.4

-7.1

0.1

4.1

-4.0

15.5

-2.9

-4.0

-4.3

9.9

0.3

2.9

-0.3

-3.5

-3.0

-1.4

-5.0

-3.1

-4.1

119.1

-1.7

-3.2

-4.6

0.0

2.7

-1.1

-1.5

-2.5

0.0

1.5

-1.6

16.4

1.5

0.9

-0.6

9.7

1.5

0.9

0.6

-2.3

-1.8

-0.1

-4.5

-2.5

-2.5

0.2

-1.5

2.1

3.7

4.8

3.3

0.4

0.2

0.0

0.7

0.3

15.9

0.4

-0.1

-1.3

9.9

1.2

1.3

0.4

-1.6

-1.5

0.3

-2.5

-0.9

-0.9

123.5

123.5

98

22.  ROMANIA 

Modest recovery ahead 

Subdued growth in 2012 

the 

severe 

GDP  growth  for  2012  is  forecast  to  be  relatively 
subdued  at  about  0.8%,  with  domestic  demand  as 
its  main  driver.  Harsh  winter  conditions  dragged 
down  economic  activity  in  the  first  quarter  (0.1% 
q-o-q) but growth recovered in the second quarter 
(0.5% q-o-q) due to robust investment and private 
consumption.  However, 
summer 
drought,  waning  consumer  confidence  and 
renewed  difficulties  in  absorbing  EU  funds  point 
to  a  bleaker  outlook.  Weak  economic  activity  is 
expected  to  depress  import  demand,  keeping  the 
current-account  deficit  broadly  stable.  Risks  to 
growth  continue  to  be  tilted  to  the  downside  in 
2012 but become  more balanced over the forecast 
horizon. The main country-specific downside risks 
in  2012  relate  to: (i) continuing  domestic  political 
uncertainties  that  could  increase  financing  costs 
and  hold  back  investment;  and  (ii) a  higher-than-
expected impact of the drought on agriculture.  

Growth  to  recover  modestly  in  2013  and  to 
accelerate in 2014 as structural reforms pay off 

In  2013,  GDP  growth  should  recover  to  2.2%. 
While  investment  is  the  main  component  behind 
growth,  it  is  projected  to  slow  down  compared  to 
2012 due to depressed activity in the rest of the EU 
and  domestic  uncertainties.  Credit  activity  is 
forecast  to  improve  only  modestly  as  banks 
continue  to  deleverage  after  a  long  period  of 
deteriorating  asset  quality.  Private  consumption 
growth  is  expected  to  accelerate,  although  it  will 
be  held  back  by  continuing  needs  for  repairing 
households'  balance  sheets  and  by  tight  consumer 
credit  lending  standards.  In  2013,  unlike  in  2010-
12, government consumption is expected to deliver 
a  marginal  positive  contribution  to  growth  on 
account of public sector wage increases. Finally, in 
line  with  the  projected  modest  domestic  demand 
recovery,  the  current-account  deficit  is  forecast  to 
widen slightly, to 4.2% of GDP. For 2014, growth 
is expected to accelerate to 2.7% as the effects of 
the  reforms  implemented  in  labour  and  product 
markets start kicking in.       

Inflation boosted by food prices 

After  temporary  downward  pressure  on  headline 
inflation in the first half of the year, HICP inflation 
increased to 5.4% in September due to rising food 

Inflation 

prices and pass-through effects associated with the 
leu's  exchange-rate  depreciation. 
is 
currently projected to increase in the remainder of 
2012 and to exceed the NBR's CPI inflation target 
(3% ± 1 pp.) for end-2012. In line with the planned 
price  deregulation  of  both  retail  and  wholesale 
sectors, energy prices are expected to exert upward 
pressure  on  inflation  over  the  forecast  horizon. 
Food prices will remain elevated in the first part of 
2013  in  view  of  a  negative  base  effect.  Given  the 
weak  economy,  wage  pressures  are  likely  to 
remain  subdued  although  public  sector  wage 
increases  may  partially  spill  over  into  private 
sector  wages.  Conversely,  a  slower-than-expected 
recovery 
have 
disinflationary  effects.  Going  forward,  annual 
inflation is currently projected to average 4.9% in 
2013 and 3.3% in 2014.  

economy  would 

the 

in 

Labour market remains weak  

While  employment  growth  turned  positive  in  the 
second quarter of 2012, job creation is forecast to 
remain  subdued  in  2012  due  to  the  difficult 
economic  climate  and  to  recover  only  modestly 
over the forecast period. This would not be enough 
to  significantly  reduce  unemployment,  which  is 
projected  to  remain  above  7%  throughout  the 
forecasting  period.  Real  wage  growth  is  expected 
to  turn  positive  in  2012.  To  recover  earlier  cuts, 
public  sector  nominal  wage  growth  is  set  to 
outpace  private  sector  wage  growth  in  both  2012 
and  2013.  Private  sector  average  compensation 
growth  is  assumed  to  be  anchored  at  around  4% 
per year, reflecting the modest economic recovery 
but also recent labour market reforms allowing for 
a  better  alignment  of  wage  growth  with 
productivity  developments.  In  2012,  unit  labour 
costs  are  expected  to  accelerate  due  to  lower 
output  growth,  while  slowing  down  over  the 
forecast  horizon  on  account  of  stronger  economic 
growth and prudent wage policies. 

2012 deficit below 3% of GDP 

The budget deficit is projected to decrease to 2.8% 
of  GDP  in  2012  from  5.5%  in  2011  due  to 
continued fiscal consolidation including through a 
continued freeze in pensions, the introduction of a 
new  social  assistance  code,  cuts  in  other  social 
benefits and increases in excises. Since the  spring 
2012 forecast, the authorities have taken decisions 

99 

European Economic Forecast, Autumn 2012

related  to  wages  and  health  contributions for 
pensioners, which  increase  the  deficit.  However,
they have compensated for this additional increase
through  a mix  of  savings  from  the  National
Programme for Infrastructure Development (PNDI 
which  consists  of  a  series  of  infrastructure  works 
mainly related to water and sewage systems) and a 
reduction in the stock of payables by using revenue
from  the  claw-back tax  to  pay  down  bills  in the
pharmaceutical sector. 

Budget  deficit  to  be  reduced  further  in  2013
and 2014 but risks remain

The deficit is forecast to decrease to 2.4% of GDP
in  2013  under  a  no-policy-change  assumption  (as 
no  draft  budget  is  yet  available),  which  includes
the  full  impact  of  the  rise  in  public  sector wages.
The  government  is  also  expected  to  foresee  0.2% 
of  GDP  in  funding  for  the  contracts  that were
signed  under  the  PNDI  programme.  It  will  also
have  to  ensure the necessary  funding  in  the
healthcare sector that will allow it to comply with 
the EU late 

Table II.22.1:
Main features of country forecast - ROMANIA

is  projected 

payments directive starting in March.(25) For 2014
the  deficit  is  expected  to  decrease  to  2%  of  GDP
no-policy-change  assumption.  The
under  a
structural  deficit 
improve
throughout the forecast horizon from close to -2%
of  GDP  in  2012  to  -1.0%  of  GDP  in  2014.  After
increasing further to 34.8% of GDP in 2013 from
34.6% in 2012, Romania's public debt is expected
to start to stabilise in 2014 following several years
of rapid growth during the crisis.  

to 

The  main  risks  to  the  budget  over  the  forecast
horizon  relate  to:  (i) possible  financial  corrections
linked  to  the  absorption  of  EU  funds  or  the
financing  from the  national budget of priority 
projects;  (ii) a  renewed  accumulation  of  arrears, 
especially at local government level; and (iii) lack 
of  progress with 
state-owned
enterprises that could result into renewed pressure
on the budget in future years.

restructuring

(25) According  to  the  EU  late  payments  directive  all  new
contracts signed after March 2013 will have to be paid by 
the  public  administration  within  60 days  in  the  healthcare
sector  and  within  30  days  in  the  other  sectors.  Currently
payment delays in the healthcare sector stand at 210 days. 

2011

Annual percentage change

bn RON Curr. prices
578.6

% GDP
100.0

92-08
2.9

2009
-6.6

2010
-1.6

2011
2.5

2012
0.8

2013
2.2

2014
2.7

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

358.4

83.2

142.1

66.7

221.8

251.6

571.0

62.0

14.4

24.6

11.5

38.3

43.5

98.7

Domestic demand
Inventories
Net exports

5.6

0.9

9.8

10.5

10.9

13.4

2.8

6.8

-1.6

-2.0

-10.1

3.1

-28.1

-27.7

-6.4

-20.5

-5.1

-15.0

1.4

7.0

-0.4

-4.4

-2.1

-32.7

14.0

11.9

-1.5

-1.6

0.0

0.0

1.3

-3.5

6.3

7.0

9.9

10.5

2.3

1.8

1.4

-0.8

-

7.4

7.3

6.9

7.6

0.4

-1.4

-2.0

-2.3

-1.9

51.6

59.7

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

23.6

33.4

52.8

30.5

-5.9

-5.0

-3.9

-4.1

-5.5

-9.3

-9.7

-1.3

-4.2

-9.0

-6.1

-6.1

-2.5

-3.9

-6.8

-7.7

-5.8

-4.8

-5.5

-5.7

-3.6

-3.7

-4.0

-0.8

-1.2

1.8

3.7

1.7

8.1

1.6

2.9

4.2

1.2

2.6

1.7

7.9

6.0

5.6

6.1

5.8

-

-

-

-

-

-

-

-

-

4.4

3.5

0.7

-5.4

-4.1

-4.0

-2.8

-1.9

-1.9

34.6

0.8

-2.3

6.7

6.7

0.2

0.5

1.0

1.8

-0.9

-0.1

0.4

7.4

4.6

4.1

1.9

2.1

5.1

5.5

3.9

5.2

2.1

2.8

0.1

2.4

1.9

5.5

6.1

5.9

6.6

2.5

3.3

0.1

-0.8

-0.7

0.8

7.3

4.9

3.5

0.9

7.3

3.9

2.2

-0.2

-0.8

-1.3

-

4.4

4.9

0.4

-5.8

-4.2

-4.1

-2.4

-1.4

-1.4

34.8

-

3.5

3.3

1.0

-5.9

-4.4

-4.3

-2.0

-1.0

-1.0

34.8

100

23.  SLOVENIA 

Deleveraging needs delay recovery 

Economy back in recession 

Slovenia has slid back into recession, with strongly 
in  mid-2012.  This  forecast 
negative  growth 
predicts  that  the  downturn  will  continue  well  into 
next  year,  yielding  real  GDP  declines  of  2¼%  in 
2012  and  1½%  in  2013  followed  by  a  return  to 
in  2014.  This 
modest  growth  of  some  1% 
protracted  weakness  of  the  economy  subdues 
inflation,  wages and credit  growth and pushes the 
current account further into surplus. However, cost 
re-
competitiveness 
established  and  the  weak  economy  also  hinders 
fiscal  adjustment  and  balance  sheet  repair  and 
pushes the unemployment rate to 9½% by 2014.  

remains 

to  be 

largely 

The  current  downturn  is  affecting  all  domestic 
demand components. Gross fixed capital formation 
has  remained  strongly  negative,  particularly  in 
construction. The inventory cycle has again turned 
negative, weighing on growth, and there has been a 
significant  fall  in  private  consumption,  related  in 
part  to  lower  new  car  purchases  and  dented 
have 
consumer 
suppressed imports, more than offsetting the fall in 
exports  caused  by  the  international  environment 
and yielding a positive contribution to growth from 
net exports. 

confidence.  These 

trends 

Graph II.23.1:Slovenia - Contributions to GDP growth

%

forecast

4

2

0

-2

-4

-6

2011

2010
HH FCE
GFCF Construction
Changes in inventories
Gross domestic product

2012

2013

2014

Gen Govt FCE
GFCF Equipment
Net exports

The  stabilisation  in  the  international  environment 
from 2013 is expected to trigger stronger growth in 
export volumes, but this is not enough to overcome 
weak  domestic  demand.  Gross  fixed  capital 
formation  remains  particularly  weak,  despite  an 
assumed  acceleration  of  EU  structural  funds 
is 
absorption.  A  1¾%  drop 

in  employment 

expected to bring the unemployment rate to around 
9¼%.  Inflation  is  expected  to  fall  from  2¾%  in 
2012  to  2¼%.  Falling  commodity  prices,  static 
nominal  wages  and  reduced  inflationary  pressure 
from depressed demand  will be partially offset by 
higher taxes.  

Going into 2014, domestic demand is projected to 
stabilise, while the pull from net exports continues 
to  decrease,  combining  to  produce  a  return  to 
modest  growth.  With  domestic  demand  stuck  at  a 
low level, inflation is projected to fall to 1½%.  

to 

their  exposure 

The  banking  system  remains  fragile  despite  the 
second recapitalisation of the largest bank in June. 
With funding conditions remaining tight, banks are 
reducing 
the  over-indebted 
corporate  sector.  This  forecast  assumes  broadly 
unchanged credit conditions with the real economy 
feeling  little  additional  impact  from  the  peak  in 
sovereign  funding  stress  in  the  third  quarter  of 
2012.  The  forecast  stabilisation  of  gross  fixed 
capital  formation  in  2013  is  clearly  subject  to 
downside risk in this respect.    

Government deficit ratio reduced, but debt still 
to exceed 60% of GDP in 2014 

The  deficit  is  forecast  to  decline  from  6.4%  of 
GDP  (including  one-offs  from  capital  support 
operations  equal  to  1%  of  GDP)  in  2011  to  4.4% 
of  GDP 
the  2012 
in  2012  as  a  result  of 
supplementary  budget,  which  cut  public  sector 
wages for the first time and reinforced restraint in 
social transfers and intermediate consumption. Net 
capital  expenditure  was  cut  also  compared  to  the 
realised expenditure for 2011. The tax system  has 
been made more growth friendly with a gradual cut 
in the corporate income tax rate and more generous 
investment and R&D allowances.  

The  deficit  for  2012  is  forecast  to  be  slightly 
higher  than  the  4.3%  of  GDP  projected  in  the 
forecast  mainly  because  of  higher 
spring 
intermediate 
compensation  of  employees  and 
consumption. 

The  2013  deficit  projection  at  3.9%  of  GDP 
incorporates the full-year impacts of the May 2012 
consolidation  package  and  the  draft  two-year 
2013-14  budget  adopted  by  the  government  on  4 
October. The parliamentary approval of the budget 

101 

European Economic Forecast, Autumn 2012

is  expected  in  late  November.  On  the  expenditure 
side  the  budget  introduces  additional  cuts  in  the
wage bill, prolongs the freeze in the indexation of
pensions  and  incorporates  effects  of  the  draft
pension  and  labour  market  reforms.  Improved
absorption  of  EU  funds  at  the  end  of  the  current 
Multiannual  Financial  Framework  underpins  a
rebound in net capital expenditure. On the revenue
side,  taken  together higher  indirect  tax  revenue
from the narrower scope of the reduced VAT rate,
higher  environmental  charges  and  new financial
services tax and higher excise duty rates more than
offset  the  further  1  pp.  reduction  in  the  corporate
income tax rate and the increased threshold for the
personal income tax bracket taxed at 41%. 

public investment.

After  deteriorating  in  recent years,  the  structural
balance is projected to markedly improve in 2012
and 2013 as the output gap widens and the nominal
deficit is reduced. However, in 2014 the increased 
headline  deficit  in  combination with forecast  real
GDP growth running above potential would cause
the structural balance to deteriorate again.

Gross  government  debt  stood  at  47%  of  GDP  in 
2011.  The  debt  ratio  is  projected  to  increase  over
the forecast horizon to some 62% of GDP in 2014,
mainly  as  a  result  of  persisting  primary  deficits, 
rising interest rates and subdued GDP growth.

In  2014,  the  deficit  is  projected  at  4.1%  of  GDP.
Except for a drop in the corporate income tax rate
of 1 pp. to 16%, the draft budget proposes no other 
the  revenue  side. 
discretionary measures  on 
Consequently, tax revenues are forecast to move in
line  with  the  tax  base.  The  forecast  incorporates
rising  interest  expenditure,  due  to larger  debt  and
higher  interest  rates,  higher  social  transfers from
growth  in  the number  of  pensioners and higher 

The deficit and debt projections are subject to risks 
from  extensive  state  guarantees,  the  recent  bank 
recapitalisations  and  possible 
further  capital
support  operations  of  loss making  state-owned 
enterprises. Finally,  as the measures  in  the  draft
2013-14  budget  were  not  yet
approved  by
parliament  and  subject  to  negotiations  at  the  cut-
off  date,  they  are  subject  to  risk,  particularly  as
regards the overall composition of the package. 

Table II.23.1:
Main features of country forecast - SLOVENIA

2011

Annual percentage change

bn EUR Curr. prices
36.2

% GDP
100.0

92-08
3.7

2009
-7.8

2010
1.2

2011
0.6

2012
-2.3

2013
-1.6

2014
0.9

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

20.9

7.5

6.7

2.8

26.2

25.8

35.7

57.8

20.8

18.5

7.9

72.4

71.2

98.6

Domestic demand
Inventories
Net exports

3.7

3.1

7.1

9.5

5.3

6.9

3.5

4.3

0.4

-1.0

0.1

2.5

-23.2

-28.9

-16.7

-19.5

-7.2

-6.1

-4.1

2.4

1.3

1.5

-13.8

-7.9

10.1

7.9

1.6

-2.1

1.9

1.5

0.9

-1.2

-8.1

9.5

7.0

5.2

0.8

-1.3

0.7

1.3

-

-

-

-

8.2

3.9

7.3

1.8

5.9

-2.2

-1.8

-1.6

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

16.4

35.0

14.9

46.9

38.6

13.5

11.9

-5.7

-4.7

-0.6

-1.6

-6.4

-4.4

-4.3

-6.0

-4.6

-4.6

-5.7

-3.1

-1.5

-2.9

-3.0

-1.0

-0.4

-0.3

-0.2

-1.8

-4.8

-0.8

-0.4

-0.4

-1.1

0.1

1.0

3.6

8.5

4.7

0.4

1.5

0.9

2.1

0.6

1.6

2.1

4.1

-

-

-

-

-

-

-

-3.0

-2.8

-8.9

-3.8

1.2

-3.2

-2.6

-4.0

-1.4

3.2

-1.6

8.5

0.5

1.2

0.1

10.9

1.1

2.8

-1.2

-1.0

2.0

2.1

-4.4

-3.0

-2.8

54.0

-2.0

-2.1

-3.8

0.2

3.0

2.0

-1.7

-2.3

-0.2

0.9

-1.7

9.3

0.4

0.2

-0.8

10.2

1.0

2.2

-0.6

-0.8

2.7

3.1

-3.9

-2.0

-2.0

59.0

0.6

-0.4

0.6

2.0

5.4

5.0

0.8

0.4

0.0

0.5

-0.6

9.6

1.5

0.1

-0.9

9.7

0.9

1.6

-0.6

-0.9

2.3

3.1

-4.1

-2.7

-2.7

62.3

102

24.  SLOVAKIA

Economy still resilient but losing pace in 2013

A supply shock spurs growth in 2012 

Following  one  of  the  fastest  recoveries  from  the 
financial  crisis  in  the  euro  area,  GDP  growth  is
forecast  to  decelerate  only slightly to  2.6%  in 
2012.  From  the  supply  side,  GDP  growth will  be
almost  entirely  driven  by  a  positive  supply  shock
in  the  automotive  industry. With  past  investment
reaching  the  production  phase,  the  production  of
passenger cars increased by more than 50% in the
first half of 2012, accounting for more than a third 
of  the  increase  in total  exports.  Excluding  the
automotive  sector, 
the  economy
stagnated  in  the  first  half  of  the  year.  The 
construction sector,  in  particular,  showed  signs  of 
weakness,  with  value  added  and  investment  both
dropping by more than 10% during the first half of 
2012.  A  strong  base  effect,  tightening  credit
standards  and  persisting uncertainty  about
the
external environment are exerting a drag on private
investment. In the absence of a major improvement
in  the  labour  market,  real  household  disposable
income is set to continue to fall and – together with
persistently  low  consumer  confidence  –  to  have  a
negative effect on private consumption.

the  rest  of 

Gradual  switch  in  the  engine  of  growth  from
exports to domestic demand

External  demand  has  been the  main  engine  of 
growth since the economy emerged from the crisis. 
Exports  growth markedly  accelerated  in  the  first
half  of  2012,  leading  to  a  sizeable  increase  in 
export market shares in spite of weakening global
trade. With production capacity in the car industry
expected to reach full potential by the third quarter
of  2012  and  recent  high-frequency indicators 
pointing 
temporary
to  decreasing  orders,  a 
slowdown  in  export  growth is  foreseen  in  2013,
followed  by  a  subsequent  pick-up  in  2014  on  the
back of more robust growth in external demand. 

Under  the  assumption  of  a  tangible  yet  moderate
impact  of  the  recently approved  consolidation
measures  on  corporate  investment,  it  is  envisaged 
that  fixed capital  formation  will progressively
increase  its  support  to  growth.  This  projection
implementation  of  announced
hinges  on 
the  automotive
investment 
industry  in  2013  and  an  acceleration  of  drawing 
from  EU  funds  to  finance  large  infrastructure
projects  in  2014.  After  four years  of stagnation,

the 
in  equipment 

in 

consumption is expected to increase moderately in
2013 as households partly draw down savings and 
real disposable income improves slowly. The latter 
the  main  driver  of  a  more
should  become 
substantial pick-up in consumption in 2014. As the
upswing  in  domestic  demand  is  projected  to only 
partly offset the deceleration in net export growth,
GDP  growth  is forecast  to decelerate  to  2%  in
2013,  also  on  account  of 
significant
consolidation  effort  taking  place  in  this year.  A 
rebound in GDP growth to 3% is foreseen for 2014
as  a  result  of  an upturn in  global  growth  and
renewed  consumer  and 
investor  confidence
underpinned by the positive cyclical lift. 

the 

Graph II.24.1:Slovakia - GDP growth and
contributions

pps.

forecast

15

10

5

0

-5

-10

07

08

09

10

11

12

13

14

Dom. demand, excl. invent.

Net exports

Inventories

GDP (y-o-y%)

The labour market remains sluggish

Despite the strength of the post-crisis recovery, the
economy did not grow fast enough to significantly
reduce  the  unemployment  rate,  which  currently
stands  around  14%,  some  5  pps.  above  the  pre-
crisis  level.  Given  the  expected  slowdown  in
economic  activity in  2013,  the  labour  market  is
likely  to  remain  sluggish  in  that year, with  a 
moderate pick-up in employment emerging only in
2014.  As  a  result,  productivity growth  is  forecast
to remain positive. Wage pressures should remain
rather  muted  throughout  the  forecast horizon 
keeping unit labour costs in check. 

Inflationary pressures easing in 2013 

After  rebounding  in  2011,  HICP  inflation  is
forecast  at  3.7%  in  2012  largely  driven  by  a
continuing  increase  in  energy  and  commodity
prices and by a pick-up in the prices of non-energy
industrial  goods  after  years  of  stagnation.  Barring
higher-than-expected 
and 
rises 
commodity  prices,  inflation is  set  to  decelerate  to 

energy 

in 

103

European Economic Forecast, Autumn 2012

close  to  2%  in  2013,  and  stabilise  thereafter  on
account  of subdued  domestic  demand  pressures
and  the  petering-out  of strong  base  effects from
previous shocks.

Fiscal consolidation set to resume in 2013 

The  strong  expenditure-based  budgetary  effort
observed  in  2011,  which  curbed  the  headline
deficit  by  almost  3  pps.  to  4.9%  of  GDP,  did  not
continue  in  2012.  The  deficit  is  estimated  to
remain close to 5% of GDP. Substantial shortfalls
in VAT, excise duties and income tax collection on
the  revenue  side,  coupled with  higher-than-
budgeted growth in expenditure on healthcare and 
subsidies are partly mitigated by higher collection
of  social  contributions  and  lower-than-expected
spending  on  pensions.  In  addition,  it  is  estimated
that revenue measures adopted during the summer
of 2012 – including a reduction in the contribution 
rate  for  the  fully funded  pillar  in favour  of the
PAYG  scheme,  a  broadening  of  the  base  of  the
bank levy introduced in January, an additional one-
off  bank  levy  for  the  last  quarter  of  2012  and  a
special levy for companies operating in a regulated
environment – will  also help  contain the deficit. 

Table II.24.1:
Main features of country forecast - SLOVAKIA

Based  on  the  2013-15  draft  budget,  a  major 
improvement  in  public  finances  is  projected  for
2013,  with  the  headline  deficit  reaching  3.2%  of 
GDP. Revenues are the main driving factor of the
adjustment.  In  addition  to  the  measures  entering
into force  in  2012,  the  government  adopted  an 
increase in the corporate income tax from 19% to 
23%,  introduced  a  new  25%  tax  bracket  in  the
personal  income  tax  on higher  incomes,  adjusted 
tax  regimes for  self-employed  and  atypical work 
contracts (i.e. workers 'by agreement'), unified and 
increased  maximum  assessment  bases  for  social
contributions  and  increased  administration fees. 
The  impact  of  the  revenue  package  in  2013
amounts to some 1.2% of GDP. The forecast also
incorporates  a  part  of  envisaged  savings  on  the
public  wage  bill  and investment.  The  structural
balance should reach 3¼% of GDP in 2013. Under 
the
slight
improvement  is  projected  for  2014,  reflecting 
mainly the acceleration of economic activity and a
more  tax-rich GDP  growth  composition.  The 
public debt ratio is expected to increase by some 5 
pps. to 56% of GDP in 2014.

no-policy-change 

assumption, 

a

2011

Annual percentage change

bn EUR Curr. prices
69.1

% GDP
100.0

92-08
-

2009
-4.9

2010
4.4

2011
3.2

2012
2.6

2013
2.0

2014
3.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

39.7

12.4

16.0

8.1

62.0

61.6

67.6

57.5

18.0

23.1

11.8

89.7

89.1

97.8

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

0.2

6.1

-19.7

-26.6

-16.3

-18.9

-3.7

-3.7

-3.8

2.6

-0.7

1.0

6.5

11.1

16.0

14.9

3.8

1.1

2.5

0.7

-0.5

-4.3

14.2

46.7

12.7

10.1

2.3

1.9

-0.7

2.0

-

-

-

-

5.1

2.5

1.8

-1.5

-2.0

13.6

14.5

12.1

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

35.6

43.3

41.0

10.7

-4.9

-5.4

-1.5

-2.5

-0.8

-4.9

-7.3

-7.5

-1.2

-0.7

-2.5

-1.7

-8.0

-7.6

-7.4

-0.8

-2.5

-0.9

-7.7

-0.9

-1.4

-0.4

-2.0

0.5

1.6

5.7

7.0

6.9

9.8

0.9

1.1

0.7

0.8

1.1

4.1

1.1

-

-

-

-

-

-

-

-

-

-

-

-

-0.1

-0.6

-6.2

-11.0

7.8

3.2

2.8

-1.6

0.0

4.2

0.3

13.5

1.3

-1.0

-3.7

9.0

2.8

3.7

-0.4

4.8

1.4

2.7

-4.9

-4.9

-5.1

51.7

0.7

0.1

2.5

2.0

4.3

3.5

1.8

1.0

0.2

0.8

0.1

13.5

2.1

0.2

-1.5

7.6

1.8

1.9

-0.2

5.4

1.4

2.6

-3.2

-2.9

-3.2

54.3

1.3

1.6

4.2

3.6

6.5

5.7

3.1

1.9

0.0

1.1

0.5

13.1

2.5

0.0

-2.1

7.7

2.1

2.0

0.0

6.1

2.2

3.3

-3.1

-2.8

-2.8

55.9

104

25.  FINLAND 

Growth losing pace, but labour market remaining strong 

Slow recovery in sight after weak 2012 

After  a  strong  first  quarter  mainly  driven  by 
private consumption, growth turned negative in all 
demand components in the second quarter of 2012. 
Growth perspectives for the second half of the year 
look  grim,  with  slow  world  growth  weighing  on 
impacting 
exports  and  domestic  restructuring 
investments  and  production.  This  is  expected  to 
result  in  a  near  standstill,  with  the  Finnish 
economy posting growth of just 0.1% for 2012. 

During  2013  and  2014  confidence  is  expected  to 
gradually  return,  resulting  in  a  slowly  picking  up 
recovery.  Private  consumption  will  experience  a 
dip in the first quarter of 2013 due to the planned 
VAT  increase,  but  will  return  to,  albeit  slow, 
growth afterwards on the back of stable disposable 
income  despite  slightly  rising  unemployment 
figures.  Although  the  restructuring  of  export-
oriented industries will take time, export growth is 
expected to pick up again as imports recover in the 
main  EU  trading  partners.  For  investments  and 
imports,  the  rebound  starts  in  the  second  half  of 
2013. Financing conditions for investments remain 
adequate,  since  Finnish  banks  benefit  from  good 
credit ratings and sound liquidity positions. 

Risks to the outlook are slightly tilted downwards, 
with major challenges stemming from the ongoing 
restructuring  in  certain  industries,  notably  the 
electronics 
impact 
employment  and  export  performance  more  than 
projected. 

sector,  which 

could 

Domestic-demand-driven growth to continue 

Household consumption in the first quarter of 2012 
was  supported  by  temporary  factors,  such  as  the 
payment  of  one-off  bonuses  in  early  2012.  Car 
sales  increased  in  the  first  quarter  by  34%  y-o-y 
due to increases in the car registration tax that took 
effect  in  April.  This  increase  in  consumption  was 
offset by a drop of equal size in the second quarter.  

The  consumption  outlook  for  2013  is  influenced 
by  the  announced  1  pp.  VAT  increase  and  by 
increases  in  income  taxation.  While  households 
might advance some purchases from 2013 to 2012 
and hereby boost consumption in the last quarter of 
2012, consumption growth will be affected in 2013 
by  slow  growth  in  real  disposable  income  and 

reaccelerate again in 2014. Real disposable income 
growth is affected by the wage agreement for 2012 
and  2013, 
setting  moderate  wage  growth, 
combined  with  an  effective  income  tax  increases 
the  non-adjustment  of  wage 
stemming  from 
brackets.  Household  savings  are  expected 
to 
stabilise around 8.2% of disposable income, below 
the levels of 2009-10, thanks to the gradual return 
of consumer confidence.  

Trade balance set to decline slightly 

With exports declining in 2012 and thereafter only 
marginally  improving  over  the  forecast  horizon,  a 
return  to  a  positive  trade  balance  is  not  in  sight. 
Imports are expected to decline less than exports in 
2012, while picking up again in 2013-14 driven by 
moderate  private  consumption  and  investments 
growth in 2014. As a result, the external balance of 
goods and services is set to remain negative and to 
continue on a downwards trend from 2012 to 2014, 
albeit at a slower pace than in recent years. 

Graph II.25.1:Finland - Trade balance and current-
account balance

10.00

% of GDP.

forecast

8.00

6.00

4.00

2.00

0.00

-2.00

-4.00

03

04

05

06

07

08

09

10

11

12

13

14

Current transfers
Income balance
Trade balance - services
Trade balance - goods
Current-account balance (CA)
Trade balance

Labour market is set to remain relatively strong 

The  fluctuations  in  GDP  did  not  substantially 
affect  the  labour  market  in  the  first  half  of  2012, 
where  employment  and  unemployment  have 
remained stable. The effect of sluggish  growth on 
the labour market is felt more clearly in the second 
in 
half  of  2012, 
unemployment. Finnish employers are expected to 
reduce  the  use  of  temporary  layoff  support  in  the 
remainder  of  2012  and  to  resort  to  permanent 
payroll  cuts.  This  can  be  explained  by  generally 
low expectations regarding growth perspectives in 
the near future – the same factor that explains the 

resulting 

increase 

in  an 

105 

European Economic Forecast, Autumn 2012

drop  in  investments.  Over  the  forecast  period,  the 
total  labour  force  will  remain  stable,  with  a  small
ageing-related  decline  in working  age  population 
offset  by  an 
the  activity  rate.
Unemployment  is forecast  to  increase  to  8%  in
2013 and to remain around the same level in 2014. 

increase 

in 

The collective wage agreement for 2012 and 2013
provides for moderate wage growth. However, the
increase  in unit  labour  costs  is  not  corrected  as
wages continue to grow faster than productivity.

Prices stabilising in 2013-14

Inflation is set to reach 3% in 2012, incorporating 
an upward  push from  increases  in  indirect  taxes.
Despite  the  VAT  increase  of  1  pp.  in  2013,
inflation is set to recede to 2.5% in 2013 and 2.2%
in  2014. The  collective  wage  agreement  for  2012
and 2013 has only a limited impact on inflation.

Public finances

Finland  has  undertaken  significant  adjustment
measures to  strengthen  the  central  government

finances.  The  central  government  deficit  is  the
main  source  of  the general government's  deficit.
Government revenues increase in 2013 on account
of the 1% VAT increase and the effective increase
in income tax, as tax brackets will not be adjusted
for  inflation.  The  government  is  benefiting from
exceptionally  low interest  rates  in financing  its
borrowing  needs.  In  addition  to  tax  increases, 
central government  expenditure  does  not  grow  in
real  terms  in  2013  as  system  of  expenditure 
ceilings is used. 

Central and local government finances will remain
in  deficit  over  the  forecast  period  and  social 
security funds will  continue  to  be  in  surplus.  The
general  government  deficit  is  expected  to  worsen 
in  2012  compared  to  2011  due  to  slower  than
expected growth, but to decrease in 2013 and 2014
on account of adjustment  measures undertaken by
the  government  and  accelerating growth.  The 
structural budget balance follows the same pattern. 
Gross  debt  is forecast  to  continue  to  grow  and
reach 55% of GDP in 2014. 

Table II.25.1:
Main features of country forecast - FINLAND
2011

Annual percentage change

bn EUR Curr. prices
189.4

% GDP
100.0

92-08
2.9

2009
-8.5

2010
3.3

2011
2.7

2012
0.1

2013
0.8

2014
1.3

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

105.2

46.0

37.1

9.5

77.1

78.3

55.5

24.3

19.6

5.0

40.7

41.4

190.4

100.5

Domestic demand
Inventories
Net exports

2.5

1.1

2.5

2.7

8.7

7.0

3.2

2.0

0.2

0.9

-2.9

1.1

-13.2

-11.7

-21.3

-17.2

-7.5

-4.1

-1.9

-2.6

3.3

-0.3

1.9

2.5

0.4

6.8

-11.8

19.2

7.5

6.9

3.2

2.1

0.8

0.4

2.6

5.7

1.8

2.7

1.7

-1.2

0.6

8.4

1.1

2.3

8.2

0.5

3.1

1.8

7.8

-2.6

-0.1

10.8

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

11.7

46.0

43.5

48.6

49.0

10.6

-2.4

-2.0

-2.3

-1.3

-0.6

-1.1

-1.0

-2.5

-0.6

-2.5

-0.4

-0.5

-1.6

-0.9

-1.1

1.4

7.4

7.5

4.2

4.2

9.3

1.7

1.8

1.7

1.8

1.4

2.0

1.6

0.7

2.1

1.7

1.6

1.5

0.4

3.3

3.4

3.1

8.6

1.0

0.8

1.0

0.3

0.3

9.0

1.8

-

1.1

-0.2

-0.8

-4.0

-2.7

-1.7

0.0

0.4

-1.6

-0.4

0.3

7.9

3.3

3.5

0.8

8.1

2.7

3.0

0.0

-0.5

-1.6

-1.7

-1.8

-0.6

-0.6

53.1

0.4

0.5

-0.1

-1.8

0.7

0.3

0.8

0.3

0.5

0.2

-0.2

8.1

3.3

2.2

0.3

8.2

1.9

2.5

-0.8

-0.9

-1.6

-1.5

-1.2

-0.1

-0.1

54.7

1.5

0.8

1.8

2.5

1.5

1.8

1.2

1.4

0.0

-0.1

0.2

8.0

3.4

2.3

0.5

8.3

1.8

2.2

-0.8

-1.3

-2.0

-1.9

-1.0

-0.3

-0.3

55.0

 Note : Contributions to GDP growth may not add up due to statistical discrepancies.

106

26.  SWEDEN 

Slowdown but no recession

A  stronger-than-expected  recovery  in  early
2012 

In  2010  and  2011,  the  Swedish  economy  enjoyed
very  strong  growth, with  a  GDP  growth  rate  of
6.1% in 2010 and 3.9% in 2011. In the last quarter
of  2011,  the  economy  contracted  by  1.1%  in  the
wake  of  the  euro-area  sovereign-debt  crisis  and
global slowdown. However, growth returned in the
first half  of  2012  at  a  surprisingly  strong  level,
triggered  by  resilient  household  consumption,
investment  as well  as  net  exports.  GDP  grew  at
around 0.7% q-o-q in the first two quarters.

Growth  to  stall  in  the  second  semester  but
good prospects for 2013-14 

is 

likely 

The  second  half  of  2012 
to  be 
characterised  by  stagnation.  Industrial  confidence
reflecting 
has  dropped  notably since  April, 
decreasing new  domestic  orders  and  the  expected
effect  of  the  strong krona  on  Swedish  exports.
While  capital formation was  held  up  by  strong 
equipment investment in the  first  half of the  year, 
currently more cautious companies are likely to cut
back  on  their  investment  plans  in  the  coming 
months, 
declining
continuously 
construction 
investment.  Financing  conditions
remain  favourable,  supported  by  low  domestic
policy rates and wide access to foreign funding for 
Swedish  banks.  During  2013,  as  uncertainty 
subsides and interest rates  stay low, investment is
expected  to  pick  up strongly  to  compensate  for 
relatively low investment levels in previous years.  

adding 

to 

Households  still  remain  relatively  optimistic,
encouraged  by  a  rise  on  the  stock market  during
the  summer,  stable  house  prices  and  decreasing 
mortgage  rates.  Real  income  growth  is  sustained
by  real wages, which  continue  to  grow  at  a solid
pace of 2-2.5% a year supported by low inflation.
In  the  coming  months,  household  consumption  is
likely  to  be  hampered  by  the  labour  market
weakening in reaction to sluggish growth. In 2013
and  2014,  households  are  expected  to  increase
their  consumption  gradually  in  response  to  an
improving  labour  market  and  expansionary fiscal
policy, which is likely to target household income,
in particular in the election year 2014.   

Swedish exports have so far been rather resilient to
the  euro-area  recession,  benefiting  from  a  large

and  diversified  export  market,  which  extends
beyond Europe. Nevertheless, the strengthening of 
the  currency  by  10%  against  the  euro  and  3%  in
nominal effective terms over the last year is likely
to sap prospects for Swedish exports in the coming 
period.  Increasingly  important  exports  of  services 
will  likely  be  less  affected  by  the  currency
appreciation  than merchandise  exports.  Overall,
exports are expected to expand only mildly in 2012
and regain dynamics in 2013 and 2014 in the wake
of  higher  demand mainly  from  the  euro  area. 
to
Overall,  annual  GDP  growth 
decelerate  to  1.1%  in  2012  before  picking  up  to
1.9% in 2013 and 2.5% in 2014. 

forecast 

is

The  labour  market  has  been  stable  over  the  last
year, with  solid  employment  growth  and  the
unemployment 
rate  hovering  around  7.5%. 
Nevertheless,  most  recent  indicators,  such  as  the
to weaker
hiring  plans,  point 
companies'
developments  in  the  labour  market  in  the  coming
months.  Only  in  the  second  half  of  2013,  is
employment 
the 
unemployment  rate will  start  to  decline gradually
to fall below 7% at the end of the forecast horizon.

expected 

resume;

to 

Graph II.26.1:Sweden - GDP growth and contributions

forecast

pps.

8

6

4

2

0

-2

-4

-6

04

05

06

07

08

09

10

11

12

13

14

Net exports

Dom. demand, excl. inv.

Output gap (% of pot. GDP)

Inventories

GDP growth (y-o-y%)

HICP  inflation  is forecast  to  increase  from  1%  in 
2012  to  2%  at  the  end  of  the  forecast  horizon.
Inflation  has  been  very  low  over  the  past  year
(between  0.5  and  1%),  reflecting  low  capacity
utilisation and the strong krona. It is likely to pick
up  once  the  downward  pressure  from krona
appreciation  has  eased  and  the  economic  activity
strengthens.  Declining  commodity  prices  will
prevent inflation from rising more markedly. Wage
pressures  are  expected  to  remain  low,  as  the  new 
wage  bargaining  round  in  early  2013  is  likely  to

107

European Economic Forecast, Autumn 2012

result  in  similar wage  agreements  as  the  round
concluded in 2011-12 (2.4% increase over a year). 

Country-specific risks have subsided

The  Swedish  economy has  shown  a  certain 
detachment from  economic  developments  in  the
euro area, in particular as far as the trading channel
is  concerned.  However,  risks  related  to  a  possible 
contagion  through  the financial  channel  remain
important.  While  the  Swedish  banking  sector
appears rather resilient, its heavy reliance on short-
term  financing  makes  it  vulnerable  to potential
funding  halts  in  case  of  a  larger  disruption  in the
financial market.

As  regards  the  housing market,  concerns  about  a
more  pronounced  price  correction  have  also
weakened.  House  prices  have  been  broadly  stable
over  the  last year,  despite  escalating uncertainties
related  to  the  sovereign-debt  crisis,  economic
contraction  and  higher mortgage  rates  in  the
second half of 2011. At present, risks related to the
housing  markets  are  more  balanced. While the
sovereign-debt
global
economic outlook have a clear discouraging effect, 
expansionary monetary  policy since  late  2011  is
likely  to  provide  an  impetus  for  rising  mortgage

and  weak 

concerns 

to mortgage  rates, 

lending  and  house  prices. As  Swedish  households
are  rather  sensitive 
three 
successive repo rate cuts have already resulted in a
slight  revival 
the  housing  market.  Krona
exchange rate developments represent another risk
both to the GDP and inflation forecast.

in 

Government 
balance despite fiscal stimulus 

finances 

to 

remain  close 

to 

The general government balance was in surplus of
0.4%  of  GDP  in  2011.  With  the  slowdown  in 
economic activity, it is likely to end in balance in
2012. In 2013, it is likely to deteriorate further to a 
deficit of about 0.3% of GDP due to fiscal stimulus 
as  announced  in  the  2013  draft  budget  of  about
0.5%  of  GDP,  and  higher  pension  payments.  The 
stimulus  partly  extends 
the
government  finances  are  set  to  return  to  a  surplus 
of 0.4% of GDP on account of higher growth. As a
result  of  the  stimulus,  the  structural  balance  is
estimated to deteriorate from 0.6 to 0.3% of GDP
between  2012  and  in  2013,  but  it  is forecast  to 
improve  to  0.7%  of  GDP  in 2014.  Higher  growth 
and planned privatisation projects should add to a
further  decline  in  the  public  debt-to-GDP  ratio
from 37.4 to 34.1% over 2012-14.  

into  2014  when 

Table II.26.1:
Main features of country forecast - SWEDEN
2011

Annual percentage change

bn SEK Curr. prices
3502.5

% GDP
100.0

92-08
2.5

2009
-5.0

2010
6.6

2011
3.9

2012
1.1

2013
1.9

2014
2.5

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

1672.9

926.0

646.0

239.8

1748.8

1531.5

3564.2

47.8

26.4

18.4

6.8

49.9

43.7

101.8

Domestic demand
Inventories
Net exports

1.9

0.7

2.9

5.9

7.0

5.7

3.0

1.6

0.1

0.8

-0.3

2.2

-15.5

-22.7

-13.8

-14.3

-6.5

-2.7

-1.6

-0.7

4.0

2.1

7.2

11.9

11.4

12.0

6.8

3.8

2.2

0.5

2.1

1.7

6.7

3.9

7.1

6.3

3.5

2.7

0.4

0.8

1.4

7.5

2.2

1.6

8.3

7.4

0.1

3.9

2.8

8.4

1.2

-2.4

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

13.8

58.5

42.6

39.5

38.4

12.9

11.3

-3.2

-1.1

-1.8

-1.4

-1.0

-1.5

-2.4

-0.8

-0.7

-0.3

-0.9

2.3

2.2

8.3

1.8

1.9

6.0

4.7

4.5

1.9

2.1

0.8

1.9

3.1

2.6

6.9

6.8

6.7

6.6

0.8

1.0

1.4

2.6

6.5

6.4

0.3

2.9

1.4

2.9

1.4

0.3

4.4

0.3

0.4

-

1.5

0.9

4.0

4.8

0.5

0.2

1.2

1.7

-0.7

0.2

0.4

7.5

2.9

2.2

1.2

14.0

1.0

1.0

-0.7

2.4

6.4

6.3

0.0

0.6

0.6

37.4

1.6

0.9

2.9

4.0

3.1

2.7

2.0

1.6

0.0

0.4

0.5

7.4

3.0

1.5

0.1

2.5

0.9

4.4

5.0

5.6

6.0

2.5

2.3

0.0

0.2

1.0

6.9

3.4

1.9

0.0

14.7

14.4

1.5

1.3

0.0

2.6

6.5

6.4

-0.3

0.3

0.3

36.2

2.0

1.8

0.0

2.6

6.5

6.4

0.4

0.8

0.7

34.1

108

27.  THE UNITED KINGDOM

Subdued growth amid continuing uncertainty 

Growth outturn unexpectedly weak

recession, 

re-entered  a 

The  UK 
technically
speaking,  in  the  first  quarter  of  2012  as  this was 
the second consecutive quarter of negative growth
(-0.3%).  This was  exacerbated  in  the  second
quarter of this year with a further decline of -0.4% 
over the previous three months, driven in large part
by the impact of an extra bank holiday in June to
celebrate the Queen's Diamond Jubilee. 

-1.1%, 

It had been foreseen that net exports would play a
stronger  role  in  2012,  given  the  relatively weak
currency. However,  this  did not  come  to fruition.
Exports  fell  in  the  first two quarters  of  2012,  by
respectively.  Furthermore,
-1.6%  and 
imports  actually  increased  by  1.4%  in  the  second
quarter and thus were a key factor in pulling down
growth.  Investment  (GFCF) had  picked  up  in  the
the  year  but  dropped  back
first  quarter  of 
substantially  (-2.7%)  in  the  second.  Likewise, 
consumption  had  shown  signs  of  recovery  in  the
preceding quarters but fell in the second quarter by
0.2%.

Outlook for growth remaining subdued

Graph II.27.1:The United Kingdom - Output gap and 
contributions to GDP growth

The  survey  indicators,  PMIs  for  manufacturing,
services  and  construction,  had  shown  signs  of 
improvement  in August  but  both manufacturing 
and  services  declined  in September  to  48.4  and 
52.2,  respectively, whilst  the  construction  PMI 
edged slightly upwards to 49.5 but remained below
the 50 benchmark which is indicative of growth.

The  outlook  for  the  remainder  of  2012  remains 
bleak  with negative  growth of  -0.3%  forecast  for
the year as a whole. The following year should see
a  marginal  improvement  to growth  of  0.9%,  as
rising wages  and  low  stable  inflation stimulate
consumption  somewhat,  along with  increases  in
investment and net trade towards the latter part of
the  year.  This strengthening  trend  is forecast  to
continue in 2014 with growth expected at 2.0%.

Consumption improving

Consumption  growth  has  been  extremely  weak,
declining in four of the last six quarters. The main
reason  had  been  low  wage  growth coupled  with
exceptionally  high  inflation, which  peaked  in
September 2011. However, owing to recent rises in
employment  and  declining inflation  throughout
2012, consumption may finally give the economy a
much-needed  injection  in  2013  and  2014,  though
initially at a low magnitude. 

pps.

5
4
3
2
1
0
-1
-2
-3
-4
-5
-6

04

05

06

07

% of pot. GDP

forecast

5
4
3
2
1
0
-1
-2
-3
-4
-5
-6

The household saving rate had been on an upward 
trend  as  households were  deleveraging  but  this  is
likely to reverse somewhat as real wages increase,
household 
and
uncertainty falls. The saving rate is forecast to fall
from 6.1% in 2012 to 5.8% in 2014.

strengthen 

balance 

sheets 

14

13

12

09

08

11

10
Output gap (rhs)
Net exports
Inventories
Dom. demand, excl. inventories
GDP (y-o-y%)

A rebound is expected in the third quarter of 2012
as  a  result  of  temporary factors,  namely the
reversal  of  the  effect  of  the  additional  holiday  in
the  previous  quarter  but  also  a  small  boost from
the  Olympics.  However,  the  outlook  for  growth
remains very weak in the short term with the main
risks  to  the macroeconomic  forecast  stemming
from weaker-than-expected  consumption  and 
investment, and increased turmoil in the euro area. 

Investment  held  back  by  uncertainty  and
funding constraints  

the 

Private  investment  has  so  far  failed  to  stimulate
growth  despite 
large  corporate  surplus.
However,  much  of  this  may  be  in  the  hands  of
extraction  companies who  do  not  necessarily
invest specifically  in  the  UK.  It  appears  that  the
uncertainty  in  the  economic  outlook  is  holding
back  investment  decisions  with  credit  constraints, 
mainly for SMEs, also curtailing activity.

In fact, the flow of credit has remained tight since
spring  as  lending  to  non-financial  corporations 
to
continued 

to  retrench  and  credit  growth 

109

European Economic Forecast, Autumn 2012 

households  remained  anaemic.  While  the  latter  is 
partially  motivated  by  the  ongoing  deleveraging 
process  of  households,  interest  rate  spreads  for 
corporate and private sector loans remain elevated 
and high bank wholesale funding costs continue to 
constrain  the  supply  of  credit.  Overall,  low  credit 
availability  continues  to  weigh  down  on  growth 
prospects,  even  as  the  demand  for  credit  remains 
weak in some sectors. 

Employment remaining resilient 

Employment has been surprisingly robust in recent 
quarters despite the fall in economic growth. After 
peaking  at  8.4%  in  the  final  quarter  of  2011,  the 
latest  quarterly  data  showed  the  unemployment 
rate  at  8.0%  in  the  second  quarter  of  2012, 
followed  by  a  further  slight  fall  to  7.9%  in  the 
three months to August.  

The effect of the recently-introduced credit easing 
measures is expected to continue to pass through to 
the real economy in the coming months and should 
contribute towards improving access to finance. In 
particular, the Funding for Lending Scheme (FLS), 
introduced in July 2012, is expected to ease credit 
conditions  to  the  private  sector  by  incentivising 
banks  to  increase  their  lending  and  may  have 
contributed to a recent increase in mortgage loans. 
Additionally,  the  quantitative  easing  programme 
will  have 
to  GBP  375  billion 
(approximately 25% of GDP) by November 2012, 
when  it  may  be  expanded  further  in  face  of  weak 
internal  demand  prospects.  There  is  also  a  non-
negligible  probability  of  a  cut  in  the  official  bank 
rate  from  0.5%  to  0.25%  that  is  currently  priced 
into the markets until 2014. 

increased 

Private  investment  is  thus  forecast  to  gather 
momentum  in  2013  and  2014,  by  2.9%  and  4.6% 
respectively,  as  credit  availability  improves  and 
uncertainty diminishes. 

Net exports negatively affecting growth 

constrained 

Notwithstanding its recent stronger stance, sterling 
remains  at  a  relatively  low  value.  However,  it  is 
increasingly  unlikely  that  net  trade  will  give  a 
positive contribution to growth this year and it will 
remain  subdued  next  year.  Expectations  that  net 
exports  would  play  a  major  role  in  the  UK's 
economic  recovery  were  disappointed  as 
the 
difficulties in the euro area, the UK's largest export 
market, 
possibilities. 
Exports to non-EU countries increased by 9.2% in 
the  3-months  to  August  compared  with  the  same 
period  in  the  previous  year  but  this  was  from  an 
extremely low base. The outlook for net exports is 
weak  in  the  short  term  as  uncertainty  in  the  UK's 
main trading partners remains high. Therefore, net 
exports  are  forecast  to  contribute  negatively  (-
0.7%)  to  growth  in  2012,  with  marginal  positive 
contributions of 0.3% and 0.5% in 2013 and 2014 
respectively, as the euro area stabilises. 

exporting 

110 

The public sector continues to shed  workers,  with 
employment  falling  for  the  eleventh  consecutive 
quarter  by  235,000  to  5.66  million  in  the  second 
quarter  of  2012.  Private  sector  employment 
increased by 471,000 over the quarter and stood at 
23.9  million  in  June  2012.  Even  after  taking  into 
account  the  possibility  of  data  revisions,  this 
phenomenon  is  hard  to  explain.  Productivity  has 
fallen  sharply  given  the  weak growth experienced 
over this period. There is likely to be some degree 
of labour hoarding, as wage growth has been very 
low  over  the  past  year.  Also,  there  has  been  an 
increase  in  part-time  and  self-employment,  some 
of  which  is  likely  to  be  involuntary.  However, 
neither  of  these  fully  explains  the  productivity 
puzzle and, given the subdued growth prospects, it 
is  unlikely  that  employment  can  continue  to 
remain  so  buoyant  in  the  upcoming  quarters. 
Therefore,  unemployment  is  forecast  at  7.9%  in 
2012  and  8.0%  in  2013,  before  falling  back  in 
2014 to 7.8% as growth improves. 

Inflation on track to reach 2% target 

After  having  peaked  at  5.2%  in  September  2011, 
inflation continued to ease as expected throughout 
2012  on  the  back  of  weak  internal  demand, 
negative 
lower 
contributions  from  externally  generated  price 
pressures  on  energy,  food  and  other  consumer 
items. In September, HICP inflation stood at 2.2%. 

earnings  growth 

real 

and 

Inflation is expected to continue to fall to stabilise 
around the Bank of England’s 2% target by the end 
of  2013.  Inflation  performance  has  recently 
benefited  from  the  fact  that  the  energy  price  rises 
in  2011  have  dropped  out  of 
the  annual 
comparison  since  September.  The  volatility  in 
agricultural  commodity  prices  is  expected  to  pass 
through  to  final  consumers  with  a  lag,  with  the 
benefits  of  the  recent  fall  in  food  prices  to  reach 
households  in  2013.  However,  the  government 
decision  to  increase  university  tuition  fees,  from 
October,  and  fuel  duty  in  January  2013  will 
marginally add to inflation, as will the utility price 
rises announced by a part of the energy industry.  

Member States, The United Kingdom 

Overall,  the  picture  for  the medium  term  is  of 
subdued  domestic  price  pressures  due 
to  a 
internal  demand  and
in 
continued weakness 
earnings  growth,  as well  as  significant  labour
market  slack.  Easing  external  pressures,  including 
the  effects  of  a  stronger  sterling  and  the  limited
ability  of  producers  to  pass  on  increases  in  input
prices,  should  also  contribute  towards keeping 
inflation  on  a  downward  trend,  even  as  a  timid 
recovery  and  the  effects  of
further  monetary
stimulus present themselves.

Consolidation continuing despite headwinds….

The  UK  government has  continued  its fiscal
consolidation  plan without  any major  changes  to
the  general  thrust  of  the  strategy.  Some minor
adjustments had been made by substituting current
for spending for capital spending, while remaining 
within  the  same  expenditure  envelope.  Recent
public finance data has been poorer than the Office
for  Budget  Responsibility's  projections,  mainly
due  to  lower  corporation  tax  receipts  rather  than 
large increases in expenditure, and may overshoot 
the  borrowing  target  for  this  financial  year  if  it 
continues on its current trajectory. VAT and work-
related receipts have remained on target, thanks to
the relative strength in the labour market. Overall,

in 

it  appears  that  the  government  may miss  its
national debt target, of having debt fall as a share 
of  GDP  by  2015-16,  if no  new measures  are 
introduced 
the  Autumn  Statement  on
5 December. The UK government's fiscal mandate 
requires that the cyclically-adjusted current budget
be on track to be in balance by the end of a rolling 
five-year  forecast  period.  This  period  currently
ends in 2016-17, outside the forecast horizon.

… while debt and deficit figures stay elevated

The  deficit  is  estimated  at  5.8%  of  GDP  for  the
financial year  (FY)  2012-13, which  is  reduced  by
the inclusion of a one-off Royal Mail pension fund
transfer  worth  1.8%  of  GDP.  On  a  no-policy-
change  basis,  the  deficit  is forecast  to  increase  to 
6.9%  in  2013-14  before  falling  back  to  5.6%  in
2014-15.  The  structural  balance  is forecast  at
-4.6%  in  2014-15.  The  debt  ratio  for  FY  2012-13 
is forecast  at  89.1%  of  GDP  and  is  expected  to 
increase  to  93.0%  in  2013-14  and  94.5%  in
2014-15.

Table II.27.1:
General overnmen

o ections on a financial-
2011-12
2010-11

 basis
2012-13

General government balance
Structural budget balance
General government gross debt

Actual 

-9.6
-8.3
79.8

-7.7
-6.5
86.0

-5.8
-6.1
89.1

2013-14
Forecast
-6.9
-5.4
93.0

2014-15

-5.6
-4.6
94.5

Table II.27.2:
Main features of country forecast - THE UNITED KINGDOM

 GDP 
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

2011

Annual percentage change

bn GBP Curr. prices
1519.1

% GDP
100.0

92-08
2.8

2009
-4.0

2010
1.8

2011
0.9

2012
-0.3

976.7

337.0

215.3

65.5

492.9

516.6

64.3

22.2

14.2

4.3

32.4

34.0

1534.0

101.0

Domestic demand
Inventories
Net exports

2.9

1.8

3.6

3.3

5.3

5.9

3.0

2.9

0.1

-0.2

-3.1

0.8

-13.7

-21.0

-8.2

-11.0

-4.8

-4.0

-1.1

1.1

1.3

0.4

3.5

7.3

6.4

8.0

1.4

1.5

0.9

-0.6

-0.9

0.2

-2.4

-0.3

4.5

0.5

1.0

-0.9

0.4

1.2

0.4

8.0

0.2

2.7

2.7

7.8

7.6

0.7

4.1

2.1

6.5

-1.6

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) Eurostat definition.  (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-11.5

-10.2

79.4

44.1

67.8

85.0

-6.7

-1.6

-1.1

-9.5

-8.9

-0.3

-0.6

-2.0

-3.0

-7.8

-3.2

-9.8

-8.9

-6.7

-3.6

-1.7

-5.9

-6.7

-6.6

-1.6

-1.3

-2.5

-1.9

-1.0

-2.3

-1.7

5.8

3.9

2.4

2.1

0.0

5.3

1.2

2.2

1.3

2.8

3.3

0.8

2.0

1.6

6.6

6.6

6.0

2.7

4.5

-

0.5

1.6

1.9

-8.2

0.2

2.6

-1.6

1.0

-0.5

-0.7

0.5

7.9

3.0

3.8

1.1

6.1

2.7

2.7

-0.1

-7.0

-3.8

-3.6

-6.2

-4.6

-6.4

88.7

2013
0.9

0.9

-2.0

2014
2.0

1.7

-1.3

2.9

3.1

3.9

2.8

1.8

0.6

0.1

0.3

0.5

8.0

2.4

2.0

-0.2

6.1

2.2

2.1

0.6

-6.9

-2.2

-2.0

-7.2

-5.6

-5.6

93.2

4.6

6.5

5.7

3.8

2.3

1.5

0.0

0.5

1.0

7.8

2.9

1.8

-0.5

5.8

2.3

1.9

-0.2

-6.5

-1.1

-0.9

-5.9

-4.8

-4.8

95.1

111

Acceding Countries 

28.  CROATIA 

Little growth but some fiscal consolidation 

Still no recovery 

temporary  stabilisation 

Following  a 
in  2011, 
Croatia is currently experiencing its second dip in 
economic  activity  since  the  onset  of  the  crisis  in 
2008.  Real  GDP  contracted  by  1.7%  y-o-y  in  the 
first half of 2012. The monthly data on retail trade, 
industrial  production,  construction  activity  and 
registered unemployment suggest, on balance, that 
economic activity has stagnated or softened a little 
further  in  the  third  quarter  in  seasonally  adjusted 
terms.  Tourism  showed  gains  compared  to  an 
already good season in the preceding year. On the 
other hand, an extreme summer drought is likely to 
exert some drag on economic output.  

the 

Reflecting 
labour 
the  ongoing  recession, 
market  has  seen  further  declines  in  employment 
and  a  rising  jobless  rate.  Although  underlying 
inflationary  pressures  have  remained  relatively 
low,  headline  inflation rose to 5.0% in September 
as a consequence of a higher food prices, a VAT-
rate  hike  in  March,  and  increases  of  administered 
prices  on  the  back  of  higher  energy  costs.  The 
current-account deficit has remained relatively low 
at around 1% of GDP. 

Graph II.28.1:Croatia - GDP growth and 
contributions

pps.

forecast

9

6

3

0

-3

-6

-9

-12

07

08

09

10

11

12

13

14

Private consumption

Public consumption

GDP growth (y-o-y%)

Net exports

Investment

Economic headwinds dampen outlook 

The  Croatian  economy  continues  to  face  both 
cyclical  and  structural  headwinds.  Contracting 
economic  activity  in  many  EU  Member  States  in 
2012,  not  least  among  some  of  Croatia's  most 
the 
important 
domestic  economy.  International  competitiveness 
has  proved  insufficient  to  prevent  a  decline  in 
export market shares in recent years. Weak labour 

trading  partners, 

is  affecting 

114 

market  conditions  continue  to  exert  downward 
pressure on incomes and spending. The high level 
of indebtedness of households and companies and 
their need to deleverage are weighing on domestic 
demand.  Credit  conditions 
relatively 
unfavourable.  Consumer  and  business  confidence 
is  suffering  from  the  uncertainties  originating  in 
the international environment. There has also been 
little  progress  in  lowering  deep-seated  structural 
obstacles to growth.  

remain 

Looking  forward  to  the  next  two  years,  it  is 
expected 
that  economic  activity  will  receive 
support from the investment side. The government 
is  promoting  capital  spending  by  state-owned 
enterprises, particularly in the energy and transport 
sectors. Even in 2012, such investments are set to 
increase  by  a  quarter,  which  is  containing  the 
decline in overall capital formation in the economy 
this year. They are expected to pick up further over 
the rest of the forecast horizon. At the same time, 
private 
investments  should  be  stimulated  by 
Croatia's accession to the EU in mid-2013.  

increasing  employment  and 

In  the  second  half  of  2013  the  more  cyclical 
headwinds  from  the  external  side  should  lessen, 
allowing  a  modest  acceleration  in  real  exports. 
Export  growth  is,  however,  projected  to  remain 
below  the  growth  of  export  markets,  implying  a 
continued  loss  of  market  share.  Rising  exports,  in 
combination with growing investments, will result 
in 
incomes  and, 
ultimately,  consumer  spending  in  2014.  On  the 
other hand, it is expected that general government 
will  detract  slightly  from  GDP  growth  in  the 
context  of  continued  fiscal  consolidation.  Imports 
should  accelerate  more  strongly  than  exports,  not 
least  because  investments  have  a  relatively  high 
import  content  in  Croatia.  This  implies  that  net 
exports will subtract from GDP growth already in 
2013  after  having  provided  an  offset  to  faltering 
domestic  demand 
recession. 
Overall,  the  upturn  of  economic  activity  will 
remain very subdued. 

throughout 

the 

A sluggish macroeconomic performance 

The forecast projects that real GDP will shrink by 
1.9%  in  the  current  year.  In  2013,  the  investment 
boost  will  be  offset  by  the  drag  from  continued 
declines  in  consumer  and  government  spending 
and rising imports. The net result is projected to be 

Acceding Countries, Croatia

Fiscal deficit projected to decline 

of 

Total 

including 

expenditure 

the  fiscal  deficit 

Fiscal  policy  has, to  some  extent,  contained  the
negative budgetary consequences of the continuing
recession. 
general
government  is  projected  to be  slightly  lower  in
nominal  terms  in  2012  while  the  tax measures in
the  2-percentage-point
the  spring, 
increase in the general VAT rate, and an apparent
improvement  of  tax  compliance  are  increasing
revenues.  Consequently, 
is
projected to shrink from 5.1% of GDP in 2011 to
4.4%  in  2012.  Although the  government has not
yet proposed the state budget for 2013, the forecast
projects  the  fiscal  deficit  to  narrow gradually  by
0.5 pp. over the next two years as the government
reins in expenditure in the framework of Croatia's
Fiscal  Responsibility  Law.  General  government
debt  is  projected  to  continue  its  steady  increase
since  the  beginning  of the  recession to  just  above
60%  of  GDP  in  2014.  This  incorporates  the  re-
attribution of the debt of the state-owned shipyards 
to the government accounts in 2012 in the context
of their privatisation.

stagnation  (±  0%  growth).  In  2014,  however,  the
balance  of  the  various  contributions  to  GDP
growth  turns  positive,  with  an  annual  growth  rate 
of  1.4%.  The  risks  to  this growth forecast  are 
mainly  on  the  downside  in  line with the  overall 
forecast  for  the  EU  economy.  The  general  risk
is
related 
exacerbated  by  the  risk  of  credit  restraint  as  a
result of bank deleveraging.

financial  markets 

international 

to 

Reflecting the GDP growth path, employment will
continue to fall in 2013 before starting to increase
in  the  following year.  Since  the  labour  supply  is
declining  structurally, 
the  unemployment  rate
should  already decline  marginally  next  year. 
Despite some disinflationary effects from the large
slack  in  resource  utilisation,  the  annual  average
rise  in  consumer  prices  is projected  to  remain 
above  3%  next year.  This  is partly  due  to  a  high
carry-over effect from 2012, but also based on the
expectation  of further  increases  in  administered 
prices  and  some  VAT  adjustments in  connection 
with  EU  accession.  In  2014  the  inflation  rate  is 
projected  to  decline  to  around  2%.  The  current-
account deficit is forecast to increase to around 2% 
of  GDP  in  2014  in  the  wake  of  rising  investment
activity and the return to consumption growth.

Table II.28.1:
Main features of country forecast - CROATIA

2011

Annual percentage change

bn HRK Curr. prices
334.0

% GDP
100.0

92-08
-

2009
-6.9

2010
-1.4

2011
0.0

2012
-1.9

2013
0.0

2014
1.4

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

197.5

66.4

62.7

-

139.5

139.8

322.1

59.1

19.9

18.8

-

41.8

41.9

96.5

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-7.5

0.4

-0.9

-1.6

-11.8

-11.3

-

-16.2

-21.4

-7.4

-7.6

-3.3

3.9

-

5.2

-1.4

-1.7

-3.7

-0.3

2.4

0.2

-0.3

-7.2

-

2.0

1.2

-0.1

-1.4

1.1

0.3

-1.7

-2.0

-5.7

-

-1.0

-2.5

-2.1

-2.6

0.0

0.7

-

-

-

-

4.5

1.0

9.1

-5.1

-1.8

-2.3

-1.8

13.5

11.8

14.2

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-14.6

-16.6

-14.2

-13.3

53.8

35.7

46.7

42.2

-0.5

-1.9

-1.2

-1.2

-4.4

-0.9

-0.9

-5.1

-5.2

-5.1

-4.2

-1.1

-1.1

-5.0

-0.3

-1.5

-2.1

-0.5

1.4

1.5

2.1

3.4

6.6

3.6

2.2

2.9

0.6

0.9

1.1

1.5

3.0

0.6

2.1

2.2

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-1.2

-0.5

5.3

-

1.5

2.0

0.0

0.3

0.0

-0.3

-0.5

13.9

1.3

0.8

-2.0

-

2.8

3.2

0.0

0.7

-0.5

7.0

-

3.3

4.0

1.4

1.8

0.0

-0.4

0.6

12.9

1.4

0.6

-1.4

-

2.0

2.1

0.3

-14.8

-15.2

-1.5

-1.5

-4.2

-

-

-2.2

-2.2

-3.9

-

-

56.6

60.6

115

Candidate Countries 

29.  THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 
From a moderate recession to an investment driven recovery 

Weaker economic activity in first half of 2012  

In  the  first  half  of  the  year,  economic  output  was 
about  1%  lower  than  a  year  before,  reflecting 
lower  exports  but  also  a  larger  share  of  imports. 
Private  consumption  rose  by  about  0.7%,  while 
public  consumption  dropped  by  2%.  In  contrast, 
gross capital formation was 11% higher than a year 
before. As a result of high import content of capital 
formation,  imports  rose  by  2.7%  in  real  terms, 
which together with declining exports resulted in a 
negative  contribution  of  net-exports  by  more  than 
3  pps. However,  this  dataset  might  be  subject  to 
substantial 
complete 
revisions,  once  more 
information  is  available. High-frequency  data  for 
the  first  eight  to  nine  months  of  2012  point  to 
continued  weak  growth.  However,  sustained 
capital inflows in the  form of  worker remittances, 
income  from  cross-border  trade,  foreign  loans  but 
also higher FDI inflows provide important support 
for economic activity.  

The trade deficit rose by ¾ pp. of GDP in the first 
half  of  2012,  while  worker  remittances  further 
increased  to  about  10%  of  the  estimated  full-year 
GDP,  which  resulted  in  a  lower  current-account 
deficit  at  about  2%  of  GDP,  compared  to  4%  the 
year  before.  Inflows  of  foreign  direct  investment 
were  very  weak  at  the  beginning  of  the  year,  but 
recovered  later  on,  bringing  FDI  inflows  to  about 
1¾%  of  GDP,  compared  to  2¾%  the  year  before. 
Foreign-exchange  reserves  continued  to  improve 
towards  the  end  of  2011,  benefitting  from  higher 
inflows of current transfers and FDI.  

Inflation  picked  up  in  mid-2012,  reaching  more 
than  5%  in  September  and  bringing  average 
inflation for the first nine months to 2.8%, clearly 
above the Central Bank's inflation target. The main 
factors  for  the  strong  increase  were  agricultural 
products, but also housing, textiles and energy.  

The labour market experienced a weak first quarter 
and  a  slightly  better  second  quarter,  resulting  in 
largely  unchanged  unemployment  rate  in  the  first 
half  of  2012,  at  31.4%,  compared  to  31.5%  the 
year  before.  Youth  unemployment  continued  to 
increase  slightly,  reaching  54.9%  of  the  age 
group's labour force.  

Public  finances  registered  a  significantly  weaker-
than-expected revenue performance. In response to 

118 

underperforming  revenues,  the  authorities  revised 
the  deficit  target  from  2.5%  of  GDP  for  2012  to 
3.5%.  The  deficit  target  for  2013  is  also  3.5%  of 
GDP.  

External sources support domestic economy  

in 

recession 

the  forecast  period,  sustained  current 
During 
transfers,  a 
largely  externally  financed  fiscal 
impulse  and  FDI  inflows  are  likely  to  prevent  a 
sharp 
an  otherwise  difficult 
international  environment.  In  the  second  half  of 
2012,  economic  activity  is  expected  to  return  to 
positive  growth  rates,  partly  benefitting  from  a 
base  effect  but  also  due  to  the  positive  effects  of 
investments.  This  could  bring 
recent  foreign 
annual growth into positive territory, although still 
below 1%. In 2013 and 2014, stronger investment 
and  private  consumption,  should  help  to  reach 
slightly  higher  growth  rates.  The  completion  of 
some  export-oriented  FDI  projects,  should  allow 
market-share  gains  in  2013  and  2014.  This, 
together  with  a 
somewhat  more  dynamic 
international  environment,  should  allow  reaching 
GDP  growth  of  slightly  below  2%  in  2013  and 
more than 2% in 2014.  

is  expected 

to  decelerate 

Inflation 
in  2013, 
following  high  price  rises  in  2012,  but  –  on  the 
back  of  stronger  growth  –  to  accelerate  again  in 
2014.  

Graph II.29.1:The former Yugoslav Republic of 
Macedonia - Labour market

y-o-y% 

% of labour force

forecast

7
6
5
4
3
2
1
0
-1
-2
-3
-4
-5

40

38

36

34

32

30

28

08

09

10

11

12

13

14

Unemployment rate (rhs)

Employment growth

GDP growth

Employment growth in 2012 is set to decelerate in 
line  with 
to  be 
the  growth  slowdown  and 
still  difficult 
the  probably 
constrained  by 
international  environment.  Wage  growth  is  likely 
to  remain  subdued,  so  as  to  maintain  price 

Candidate Countries, The former Yugoslav Republic of Macedonia

public consumption, such as public sector wages or 
current expenditure. 

competitiveness.  Improving the  country's  labour 
income 
raising 
productivity  by modernising  and  deepening the
capital stock.

strongly  depends  on 

thus

The trade deficit is likely to rise. The high import
content  of investment will  lead  to  rather  strong
import growth, which will more than offset higher
exports,  resulting from market  share  gain  as  a
result  of  increased  FDI  inflows.  The  surplus  in 
private current transfers is expected to return from
its  current  exceptionally high  level  of nearly  20%
of GDP towards its longer-term average. This will
contribute  to  a widening  of  the  current-account
deficit, from around 3½% of GDP in 2012 to 5½%
in 2013 and 6½% in 2014. 

3

2

1

0

-1

-2

-3

-4

-5

Graph II.29.2:The former Yugoslav Republic of
Macedonia - Public finances

% of GDP

% of GDP

forecast

40

35

30

25

20

15

10

08

09

10

11

12

13

14

General government debt (rhs)

General government deficit

Public finances deteriorate 

We  do  not  expect  the  deficit  to  go  below  3%
before  2014,  as  the  authorities  remain  committed
to meet their recently revised deficit target of 3.5%
in  2012  and  2013.  Given 
the  governments'
medium-term  strategy  of  increasing  spending for 
public  investment,  the  authorities  will  have  to
maintain their policy of  containing spending for  

The  debt  ratio  is  expected  to  increase  further, 
reflecting  subdued  nominal GDP  growth,  slightly 
rising  debt  financing  costs  and  higher  primary
deficits. Envisaged additional investment projects,
such  as  plans  to  improve  the  country's  transport 
infrastructure or to modernise the countries' ageing
energy production facilities, could lead to a further
increase in the debt ratio.  

Table II.29.1:
Main features of country forecast - THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA
Annual percentage change

2011

bn MKD Curr. prices
461.7

% GDP
100.0

92-08
1.2

2009
-0.9

2010
2.9

2011
2.8

2012
0.8

2013
1.7

2014
2.2

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

341.3

85.3

96.8

-

251.8

342.1

447.8

73.9

18.5

21.0

-

54.5

74.1

97.0

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-4.7

0.5

-4.3

-

-15.8

-14.3

-0.6

-4.6

0.8

2.9

1.3

-2.0

-2.7

-

23.6

9.5

1.9

0.4

-0.6

3.4

4.0

-2.8

17.3

-

11.3

14.0

2.6

5.7

1.0

-3.9

0.8

-1.0

6.0

-

1.5

2.3

0.8

1.6

0.0

-0.9

-

-

-

-

1.1

6.2

1.5

6.9

2.5

0.7

30.9

31.9

32.2

30.8

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-23.6

-23.3

-22.5

-20.8

31.0

23.8

10.6

28.3

41.5

25.8

-0.1

-0.1

-2.1

-3.6

-3.5

-0.9

-2.7

-2.5

-0.8

-4.6

-6.8

-2.7

-1.4

-2.1

-2.5

2.0

2.9

0.0

3.4

2.5

9.9

0.7

4.7

2.0

1.6

3.9

5.6

2.7

4.2

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1.1

0.0

10.0

-

5.1

5.5

1.7

3.0

0.0

-1.4

1.3

30.5

1.8

1.4

-0.2

-

1.6

2.0

0.0

-24.7

-5.5

-

-3.5

-

-

1.5

-0.5

12.0

-

8.0

7.9

2.3

3.8

0.0

-1.6

1.7

30.0

2.6

2.1

0.1

-

2.0

2.3

0.0

-26.0

-6.5

-

-2.8

-

-

33.5

35.0

119

30.  ICELAND 

Recovery on track amid risks and uncertainties

in 

investment  growth  is  expected  to moderate,  since
investments
for  some  big  projects  are  being 
delayed. The forecast assumes, however, that some
long-planned  investment  projects  in  the  energy-
intense  and  maritime  sectors  will  eventually start
to materialise 
the  second  half  of  2013. 
Investment growth is thus foreseen to accelerate in 
2014. However, downside risks are clearly related
to 
the  possibility  of more  vocal  domestic
opposition  to  FDI  and  a  lower  risk  appetite  by
foreign 
investors  should  global  uncertainties
persist or aggravate. Total exports are projected to
strengthen  due 
to higher  fishing  quotas,  an 
improved  outlook  for  the  aluminium sector  and  a 
flourishing  tourism  sector.  At  the  same time,  the
growth in imports remains strong, since production 
and consumption rely heavily on imports.

...but risks and uncertainties remain elevated

Overall,  the  forecast  projects domestic  demand  to 
remain  the main  driver  of  growth,  while  the
contribution  of net  exports  is  set  to  remain
negative. Average growth over the medium term is
expected to remain at around 2.5-3.0%. Downside
risks  would  mainly result  from remaining balance
sheet  vulnerabilities  in  both  the  corporate  and  the
household  sectors,  as well  as  the  challenging 
global  outlook.  Moreover,  the  Icelandic  economy
is  currently  shielded  by  extensive  capital  controls
and their removal remains a huge challenge going 
forward.

Labour market conditions are improving…

Iceland has seen a jobless recovery in 2011, but in
early  2012  labour  market  conditions started  to
improve, and the level of total employment rose by
about  1% y-o-y  in  the  first half  of  the  year.  The 
unemployment  rate  was  recorded  at  7.2%,  a
significant  improvement  compared  to  the  rate  of
8.2%  in  the  same  period  of  2011.  The  forecast
assumes  that  labour  demand  will  increase  as 
economic  activity 
robust.
remains 
Average employment is set to rise by a little more
than  1%  p.a.  over  2013-14.  This will  support  a 
gradual further reduction of the unemployment rate
to around 5.5% - still high for Icelandic standards.

relatively 

Economic recovery settled in early 2012 ...

Economic recovery has taken hold in Iceland with 
real GDP up by 2.6% in 2011, following a drop of
4%  a  year  before.  In  the first half  of  2012,  the 
economy  continued  to  grow,  at  2.4%,  based  on
robust domestic demand. Net exports continued to
be  a  drag  on  growth  as  import  growth  outpaced 
export  growth.  High-frequency  indicators  suggest
a  mixed  picture.  Consumer  confidence  indicators
rose  for  sixth  months  in  a  row  in  September  and
tourism  has  performed  exceptionally well  during
the  summer.  But  payment  card  turnover  suggest
some mild moderation  of  private  consumption  in
the third quarter.  

…  and  is  likely  to  continue  over  the  forecast
horizon… 

to 

the 

The  economic  outlook has somewhat  improved
compared 
forecast.  Private 
spring 
consumption growth  is  set  to  accelerate  in  2012, 
benefiting  from  high wage growth,  an  increase  in 
employment,  improved  confidence  levels  as well
as 
rising  asset  prices.  Household  spending 
continues to be supported by temporary measures,
such as one-off debt relief, extraordinary mortgage
interest  allowances  and  withdrawals  of savings 
from voluntary pension schemes, but these effects
are  likely  to  fade  out.  Therefore,  the  forecast
projects  private  consumption  growth  to moderate
in  2013,  before  it  accelerates  again  in  2014,
primarily due to wage settlements. 

Graph II.30.1:Iceland - GDP growth and
contributions

pps.

forecast

15

10

5

0

-5

-10

-15

-20

-25

07

08

09

10

11

12

13

14

Inventories
Net exports
Dom. demand, excl. invent.
GDP (y-o-y%)

Investment  spending has  been  stronger 
than
expected  in  the  first  half  of  2012,  but  this was 
largely  due  to unusually strong  investments  in
ships  and  aircraft.  For  the  year  as  a  whole,  total 

120

Candidate Countries, Iceland

…but inflationary pressures remain

In  reaction  to  rising inflation  in  2011  and  early
has  been  gradually
2012,  monetary  policy
tightened  between August  2011  and  June  2012.
Annual  inflation has  come  down  from  the  2012
peak  of  6.5%  in April  to 4.3%  in  September. 
However,  inflation  pressures remain  elevated  due
to  robust  domestic  demand,  higher  capacity
utilisation  and 
the  potential  for  rising wage
pressures, in particular in the export sectors. Also, 
a  weaker-than-expected  exchange  rate  is  likely  to 
push import  prices  up  and  boost 
inflation 
expectations, which are already high. The forecast
assumes that annual inflation remains considerably
above  the  Central  Bank's  inflation  target  (2.5%) 
over the forecast period.  

Trade surpluses slowly eroding 

The  surplus  in goods  and  services  trade  has 
recently narrowed,  due  to  stronger  merchandise
imports. In view of recovery, the forecast projects
this trend to continue, albeit at a slower pace, since
exports  are  gaining some  strength  as well.  The 
current-account deficit is expected to remain in the
range of 7-8% of GDP. A large part of the deficit
accounts for net income from banks in winding up

proceedings. Corrected for these, the "underlying"
current  account 
likely to  remain  broadly
unchanged, hovering around a zero balance.

is 

Reducing public debt remains a challenge

The 2012 budget targets a reduction of the general
government  deficit  to  1.4%  of  GDP,  to  be 
supported  by  new  consolidation measures  of 
around 1.7% of GDP with most of the adjustment
on  the  revenue  side  (1.2%  of  GDP).  However,
compared  to  initial  plans,  some fiscal  loosening
materialised  on  the  expenditure  side  and  2012 
spending  is  projected  to  exceed  budget  plans.  In 
our  forecast  a  continuation  of  gradual  deficit
reduction  over  2012-14  is  expected.  The  general
government debt-to-GDP ratio will start to decline 
in 2012 and fall below 90% of GDP by end-2014. 
The  fiscal  scenario  remains subject  to  downside
risks.  Implementing  expenditure  restraint  has 
become more challenging following years of fiscal
adjustment  and  new  expenditure  pressures  are 
mounting, also in  view of the general elections in
spring  2013.  Risks  are  also related  to  contingent
liabilities.  More  specifically,  the  government may
need  to  inject  additional  capital  into  the  loss-
making housing financing fund.

Table II.30.1:
Main features of country forecast - ICELAND
2011

Annual percentage change

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

bn ISK Curr. prices
1626.3

% GDP
100.0

92-08
3.5

2009
-6.6

2010
-4.0

2011
2.6

2012
2.7

2013
2.3

2014
2.9

844.6

411.2

227.0

-

964.7

825.8

1382.8

51.9

25.3

14.0

-

59.3

50.8

85.0

Domestic demand
Inventories
Net exports

3.1

3.1

4.6

-

5.0

4.6

2.2

3.7

0.0

-0.1

-15.0

-1.7

-51.4

-

7.0

-24.0

-4.1

-20.9

-0.1

14.4

0.0

-3.4

-8.6

-

0.6

4.5

-1.7

-2.1

-0.7

-1.7

2.7

-0.9

12.8

-

4.1

6.8

5.7

2.8

1.6

3.6

-0.2

9.3

-

4.2

5.7

3.1

3.1

0.0

2.7

0.1

8.9

-

3.9

5.3

2.5

2.7

0.0

3.2

-0.3

12.3

-

3.9

5.7

3.1

3.5

0.0

-0.8

-0.4

-0.4

-0.6

7.1

0.1

4.4

7.2

3.4

1.6

6.4

6.0

7.6

6.4

0.9

-1.9

-6.0

-0.4

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 General index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

101.0

-10.0

-10.1

-12.1

-11.5

96.8

87.9

12.0

93.0

10.1

-0.3

-7.3

-3.4

-7.0

-8.9

-8.0

-1.4

-5.4

-0.6

-2.2

-2.9

-1.6

-7.3

7.6

5.7

0.4

5.3

5.6

5.6

0.1

4.4

4.1

8.3

6.9

4.1

3.2

5.4

4.0

1.5

3.0

6.0

8.5

6.0

7.8

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

1.0

5.7

6.2

4.8

0.1

-

4.7

4.4

0.0

4.9

-7.5

-

-2.4

-

-

1.2

5.4

6.2

4.4

0.0

-

4.4

4.4

0.0

4.7

-7.8

-

-1.2

-

-

93.2

88.0

121

31.  MONTENEGRO 

Seeking the restoration of the lending channel 

Recent developments 

the  economy  expanded  faster 

In  2011 
than 
expected,  by  3.2%  in  real  terms.  Growth  was 
driven by the recovery of exports as well as by the 
expansion of private consumption, notwithstanding 
an 11% annual contraction in bank lending. On the 
production  side,  value  added  was  driven  in  2011 
by  double  digit  growth  rates  in  trade,  agriculture, 
manufacturing and construction. 

presenting  encouraging  results.  However,  meagre 
employment  rates,  combined  with  negative  real 
growth of wages, are limiting private consumption. 
Meanwhile,  budget  consolidation  efforts  will 
continue  withholding  government  consumption, 
further  contracting  public  spending  in  real  terms. 
The formation of fixed capital will be financed to a 
large  extent  by  foreign  investments  in  a  few 
mature projects. On the external sector, net exports 
contribution is expected to remain negative. 

Graph II.31.1:Montenegro - GDP growth and 
contributions

forecast

pps.

6

4

2

0

-2

-4

10

11

12

13

14

Dom. demand, excl. invent.

Net exports

Inventories

GDP (y-o-y%)

Further  deterioration  in  net  exports  and  industrial 
output  brought  GDP  down  by  -0.9%  y-o-y  in  the 
first  half  of  2012.  The  negative  impact  of  harsh 
winter  conditions  in  the  first  quarter  of  2012 
resulted  in  an  annual  contraction  in  GDP  in  real 
terms  of  -2.4%.  The  economy  avoided  entering 
into  technical  recession  after  recording  positive 
annual  growth  of  0.3%  in  the  second  quarter, 
sustained  by  two-digit  growth  of  retail  sales  as 
well as the stagnation of imports. 

An episode of sluggish growth 

Following  the  weaker-than-expected  outlook  for 
the  global  economy  and  the  protracted  euro-area 
sovereign-debt  crisis, 
there  will  not  be  any 
recovery of credit activity in Montenegro in 2012. 
The restoration of the lending channel is expected 
to take place in 2013, with a more noticeable effect 
on  consumption  and  domestic  investment  a  year 
after.  Notwithstanding,  positive  albeit  sluggish 
GDP  growth  could  still  be  expected  for  2012  as 
preliminary  results  from  the  tourism  industry, 
which has a substantial impact on private domestic 
demand, are positive. In addition, some sectors like 
transport,  chemicals  or  pharmaceutical  are  also 

122 

The  unemployment  rate  continues  to  be  high, 
although  very  slowly  declining  below  its  current 
ratio of 20%. Although investments in construction 
and  tourism  will  have  a  positive  impact  on 
employment, this impact will be reduced by a still 
substantial  share  of  seasonal  jobs.  Overall,  the 
improvement  of  occupation  rates  will  have  a 
moderate  impact  on  wages,  as  public  sector 
salaries remain subject to fiscal discipline. 

Consumer price inflation accelerated in 2012 and it 
is  expected  to  average  4%  by  year's  end.  Apart 
from oil and food price dynamics, the increase also 
reflects  several  tax  rises  on  alcoholic  beverages, 
electricity,  as  well  as  on  coffee,  tobacco  and 
carbonated  drinks.  Once  the  base  effect  of  these 
one-off 
the  gradual 
increases  fades  out, 
recovery  of  domestic  demand  should  not  exert 
strong  inflationary  pressures  and  consumer  price 
inflation may come under 3% in the second half of 
2013.  The  expected  moderation  in  international 
energy prices in the  mid-term should also support 
price stability. 

tax 

recorded 

current-account  deficit 

The 
some 
deterioration in the first half of 2012 driven by the 
widening  trade  deficit.  Exports  of  goods  will 
stagnate  in  2013  and  2014,  as  the  major  metal 
exporter  halved  production  in  mid-2012  and  its 
future  remains  quite  uncertain.  The  contraction  of 
merchandise  exports  will  be  partially  balanced  by 
the better performance of services, and tourism in 
particular, as well as some contributions from steel 
the  slow  but  gradual 
and  electricity.  Yet, 
acceleration of domestic demand, and in particular 
of  investment  (FDI),  may  also  result  in  higher 
imports  flows,  leading  to  an  overall  negative 
contribution of net exports. 

Two  major  risks  remain.  One 
is  related 
international  financial  markets  and  access 

to 
to 

external financing,  not  only  for  domestic  banks 
and the sustainability of the external accounts, but
also for financing the general government deficits.
The  second  risk  concerns  the  future  of  the  highly 
indebted  aluminium  plant,  which  could  threaten
the stability of public finances given the exposure
of  the  government  through state  guarantees  and 
partial ownership.

Overall,  growth will  decelerate 
than
expected in 2012 before rebounding in 2013 when 
bank 
start  supporting  private
lending may
consumption and investment.

faster 

The lengthy redressing of public finances

After recording a consolidated cash deficit of 3.7% 
of  GDP  in  the  first half  of  2012,  the  budget
execution presented  positive  balances  in July and 
August  bringing  the  cumulated  cash  deficit  down
to 2.5% of GDP in the first eight months of 2012. 
Several 
to
underperform,  although,  these  are  being  offset  by
the  improved  collection  in corporate  as well  as
personal 
security
taxes  and 
contributions.  While  total  revenues  are  coming in 
line with the plan, further consolidation is still  

continued 

revenue 

income 

social 

items

still 

Candidate Countries, Montenegro

taking place on both current and capital spending.
Public  spending  levels  are  set  to  remain flat  in
nominal  terms,  although  some  recovery  in fiscal
revenues could be expected in 2013, notably on the
second half, as the real sector regains some access
to  bank  credit.  However,  after  several  years  of
budget  restrictions,  capital  spending  could  record
some  positive  growth 
the 
contribution  of  public  consumption  is  expected  to
remain negative 
in  2013  and
in  real 
marginally positive in 2014. 

in 2014.  Overall, 

terms 

In the third quarter of 2012 the public debt reached 
50%  of  GDP.  The  external  debt  is  predominant,
accounting for three quarters of total indebtedness.
Public debt should further increase to some 52% of 
GDP  by  end  of  2012,  driven  by  general
government
financing  needs  and  one  state
guarantee disbursement. Public debt is foreseen to
in  2013  as  persistent  budgetary
rise  further 
financing needs are covered by loans extended by
international financial institutions. The recovery in
primary  surpluses  will  partially  reduce  financing
needs  in  2014,  gradually stabilising  public  debt, 
but  on  condition  that  further contingent  liabilities
do not materialise or very large capital investments
are not financed through public debt. 

Table II.31.1:
Main features of country forecast - MONTENEGRO

2011

Annual percentage change

mio EUR Curr. prices
3234.1

% GDP
100.0

92-08
-

2009
-5.7

2010
2.5

2011
3.2

2012
0.2

2013
2.4

2014
3.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

2728.5

714.7

596.5

-

1299.3

2140.1

3324.9

84.4

22.1

18.4

-

40.2

66.2

102.8

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-23.2

-2.1

19.6

-3.4

1.4

4.5

0.9

-0.6

2.9

3.5

-1.6

-2.3

-

-0.4

2.0

0.2

2.1

-0.1

-1.8

-

-

-

-

0.8

-2.0

-2.9

-3.8

-6.2

19.7

19.7

12.7

19.1

20.0

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 General index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-44.7

-20.1

-46.2

-42.3

-29.6

-19.6

-42.8

-24.6

52.0

38.2

45.9

40.9

-3.2

-6.5

-4.0

-3.7

-5.4

-5.7

-4.9

-1.0

-6.2

-3.3

-7.1

3.6

3.9

3.2

3.4

2.4

1.6

0.5

7.7

6.0

0.9

3.1

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

3.6

-0.6

2.7

-

2.9

3.3

2.3

3.4

0.0

-1.1

1.0

19.7

1.1

-0.3

-2.4

-

2.1

2.7

-

-45.0

-20.8

-

-3.2

-

-

3.9

0.4

3.7

-

3.1

3.5

2.9

4.1

0.0

-1.2

1.4

19.4

4.1

2.4

0.1

-

2.3

2.5

-

-45.1

-20.8

-

-2.0

-

-

53.5

53.1

123

32.  SERBIA 

Recession followed by a sluggish recovery 

Back in recession... 

Economic  activity  deteriorated  sharply  in  early 
2012, with negative growth rates of -2.5% y-o-y in 
the  first  and  -0.8%  y-o-y  in  the  second  quarter. 
Both domestic demand and net exports contributed 
negatively  to  growth.  In  line  with  the  steep 
indicators 
economic  decline, 
private 
reached 
ten-year 
consumption.  The 
in 
government  expenditure  in  the  first  half  of  the 
year,  linked  to  the  May  elections,  temporarily 
boosted  public  consumption.  It  also  supported 
relatively  buoyant  growth 
imports,  while 
exports  were  strongly  hit  by  severe  weather 
conditions in the winter. 

labour  market 
lows, 

depressing 

significant 

increase 

in 

taxation  are  expected  to  undermine  household 
income  and,  together  with  further  reduction  in 
employment, are projected to bring another drop in 
is 
private  consumption.  Public  consumption 
forecasted  to  turn  negative  as  well,  following 
increased  fiscal  pressures.  Private  investments  are 
expected  to  start  recovering  but  only  slowly,  as 
capital  inflows  remain  subdued  and  companies 
continue 
liquidity  problems.  The 
contribution from domestic demand is projected to 
become positive only in 2014. However, real GDP 
growth  is  likely  to  be  constrained  to  2.0%,  as 
public  consumption  continues  to  pull  it  down  and 
net imports’ contribution to growth turns negative 
again  as  a  result  of  a  recovery  in  imports  and  the 
expiration of base effects on the export side. 

face 

to 

from  external 

The  forecast  projects  a  significant  drop  in  output 
by  1.6%  in  2012,  mainly  as  a  continuation  of 
supressed  private  consumption  and  a  negative 
contribution 
trade.  Household 
consumption,  in  particular,  is  expected  to  remain 
weak  this  year.  Strong  increases  in  real  wages  in 
the  first  half  of  2012  are  expected  to  decelerate 
rapidly  by  the  end  of  the  year,  and,  coupled  with 
shrinking  employment  and 
lower  remittances 
inflows,  are  projected  to  result  in  a  real  drop  in 
private  consumption.  Increased  indirect  taxation 
(mostly due to a VAT hike from 18 to 20%) in the 
last  quarter  is  expected  to  weigh  heavily  on 
consumption,  with  its  full  impact  felt  in  2013. 
Public  consumption  growth  is  forecast  to  stay 
in  2012  as  government  expenditure 
positive 
growth is set to be tamed only as of  next  year. In 
an  overall  uncertain  environment  and  with  falling 
FDIs, investment is expected to be sluggish and to 
have  minor  impact  on  growth.  Net  imports  are 
likely  to  be  affected  negatively  by  a  severe 
summer  drought,  which 
impacted  heavily 
important crops. However, exports are expected to 
be  boosted  in  the  last  quarter  of  the  year  by  the 
opening  of  a 
large-scale  automotive  factory, 
underpinning also a significant export expansion in 
2013. 

...followed by sluggish growth 

Domestic  demand  is  expected  to  further  fall  in 
2013,  mainly  as  a  result  of  fiscal  consolidation 
measures. However, strong increases in net exports 
and  base  effects  are  set  to  lead  to  a  limited 
economic  recovery  of  1.5%.  Higher  inflation  and 

Graph II.32.1:Serbia - Labour market

y-o-y% 

% of labour force

forecast

28

26

24

22

20

18

16

14

12

10

8

6

4

2

0

-2

-4

-6

-8

-10

08

09

10

11

12

13

14

Unemployment rate (rhs)

Employment growth

GDP growth

Employment is set to continue falling in 2012 and 
2013,  albeit  more  moderately  than  in  previous 
years, before turning around in the last year of the 
forecast.  Unemployment  is  expected  to  peak  in 
2013 and to remain high in 2014 as well. The lack 
of vigorous job creation is likely to persist as one 
of the key policy concerns. 

Unfinished external adjustment... 

The  overall  uncertainty  in  the  pre-election  period, 
the  unchecked  fiscal  expansion  and  deteriorating 
external  imbalances  led  to  a  depreciation  of  the 
dinar,  which  has  lost  about  10%  of  its  value 
against the euro since the beginning of 2012. The 
external  adjustment  is  far  from  finished,  with 
current-account  deficits  forecasted  to  remain  at 
double-digit levels. 

124 

Candidate Countries, Serbia

in  expenditure. 

to  a  pre-election  surge 
In 
September,  the  Parliament  adopted  a  rebalancing 
of the 2012 budget, targeting a consolidated deficit
of 6.7% of GDP. The measures are mainly on the
revenue  side,  as  a  number  of - mostly indirect - 
taxes have  been  increased.  On  the  expenditure 
side,  the major  short-term  savings  are  to  come
from lower indexations of public sector wages and
pensions.  However,  in  2012  these  savings  are 
projected to be more than offset by an increase in
other discretionary expenditure.

In  view  of  the  low  economic  growth  and  difficult
labour  market  situation,  fiscal  adjustment 
is
foreseen  to  be  challenging.  As  a  result  of  the
consolidation measures  taken  in  late  September 
2012, the budget deficit is expected to come down
significantly  to  4.2%  of  GDP  in  2013  and  to  fall
again,  at  a  slower  pace,  in  2014.  Still,  budget
deficits  are  projected  to  remain high,  above  the
levels  targeted  in  the  draft medium-term fiscal
strategy  and 
2013  budget,  and 
government  debt  is  set  to  continue  increasing
above  60%  of  GDP.  Therefore,  additional
consolidation  measures  may  be needed to further
reduce  deficits  and  comply with 
the  fiscal
responsibility legislation.

the  draft

the  severe  drought, 

In  view  of 
insufficient
competition,  potential  further  weakening  of  the
dinar,  increased  indirect  taxation,  and  the  need  to 
adjust  upwards  administered  prices,  short-term
inflation  pressures  are 
to  be  acute,
countering  disinflationary  effects  from  the  weak
the  forecast  period, 
domestic  demand.  Over 
inflation is expected to remain volatile, most of the
time outside the Central Bank target band. 

likely 

Graph II.32.2:Serbia - Public finances

% of GDP

% of GDP

forecast

80

70

60

50

40

30

20

3
2
1
0
-1
-2
-3
-4
-5
-6
-7

08

09

10

11

12

13

14

General government debt (rhs)

General government balance

...and challenging fiscal consolidation 

The  public  finances  deteriorated  significantly  due

Table II.32.1:
Main features of country forecast - SERBIA

2011

Annual percentage change

bio RSD Curr. prices
3175.0

% GDP
100.0

92-08
-

2009
-3.5

2010
1.0

2011
1.6

2012
-1.6

2013
1.5

2014
2.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

2539.5

621.2

589.4

-

1170.6

1696.6

3097.7

80.0

19.6

18.6

-

36.9

53.4

97.6

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-2.3

0.4

1.6

-

-

-

-

-

-

-

-

-

-1.5

3.7

-2.1

-

2.7

3.1

-1.8

-1.0

0.0

-0.6

-

-

-

-

-

-

-8.4

-7.3

-6.0

-2.8

23.0

19.2

16.1

26.4

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 General index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-19.9

-12.4

58.1

34.7

47.7

44.5

11.1

-0.9

-6.7

-8.9

-5.0

-7.2

-4.5

-7.4

-4.7

6.8

7.3

8.1

6.1

5.9

4.9

8.4

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-1.6

-3.3

3.0

-

11.5

3.8

1.3

-1.4

0.1

2.8

-0.2

26.5

-

-

-

-

9.4

10.5

0.9

-17.5

-10.3

-

-4.2

-

-

1.4

-1.3

5.6

-

4.6

4.2

1.6

2.1

0.3

-0.4

1.2

25.7

-

-

-

-

3.8

5.2

-0.2

-18.3

-11.5

-

-3.6

-

-

61.2

65.3

125

33.  TURKEY 

Growth slows down and rebalances away from consumption 

Growth slows down significantly  

The  annual  rate  of  real  GDP  growth  slowed 
steadily from 11.9% in the first quarter of 2011 to 
3.1%  in  the  first  half  of  2012.  GDP  growth  is 
forecast to fall further from about 3.0% in 2012 to 
2.9% in 2013, before rising to 3.7% in 2014.  

30

20

10

0

-10

-20

Graph II.33.1:Turkey - GDP, consumption and 
investment growth

y-o-y %

y-o-y %

forecast

09

10

11

12

13

14

GDP growth (rhs)

Gov. consumption

Private consumption

Investment

9

6

3

0

-3

-6

Private  consumption  growth  is  expected  to  slow 
sharply in 2012, owing to a strong base effect from 
the  2011  spending  surge,  slower  employment 
growth, decelerating credit  growth and the impact 
of a weaker lira on demand for imported consumer 
goods.  Under  the  assumptions  that  the  exchange 
rate  of  the  lira  stabilises,  monetary  policy  is  not 
tightened more rapidly than currently priced in by 
financial  markets  and  consumer  confidence  stops 
falling, private consumption growth should pick up 
from  0.4%  in  2012  to  2.0%  to  2013  and  3.5%  in 
2014. 

Public  consumption  growth  is  expected  to  slow 
down  moderately,  from  4.5%  in  2011  to  3.7%  in 
2012, before it picks up to 5.3% in 2013 and 6.6% 
in  the  election  year  2014.  The  government  is 
expected  to  hold  down  the  deficit  via  higher 
revenue rather than constraining spending.  

rebounding 

in  2010-11,  gross 

After 
fixed 
investment  growth  is  forecast  to  slow  down  in 
2012  due  to  base  effects  and  lower  external  and 
domestic  demand  growth,  but  it  should  pick  up 
again  in  2013-14  as  business  sentiment  improves 
and economic conditions stabilise.  

126 

The  weakness  of  import  demand  and  the  strength 
of  export  growth  in  the  first  half  of  2012  suggest 
that  the  economy  may  be  rebalancing  faster  than 
previously  projected.  Exports  growth  (goods  and 
services)  is  foreseen  to  outpace  import  growth  in 
2012 and 2013, resulting in a positive contribution 
to  GDP  growth  from  net  exports,  compared  with 
in  2010-11.  In  2014, 
negative  contributions 
imports  are  forecast  to  increase  broadly  in  line 
with  domestic  demand,  and  as  a  result,  the 
contribution  of  net  exports  to  growth  would  turn 
negative again.  

Fiscal policy remains relatively tight 

The  government  is  expected  to  keep  fiscal  policy 
relatively  tight,  out  of  concern  about  the  growing 
current-account  deficit,  a  wish  to  maintain  a  low 
level  of  public  debt  and  a  preference  for  private 
growth.  Nevertheless,  weakening 
sector-led 
economic  activity  will  increase  the  government's 
desire 
its 
management of the public accounts, in particular in 
2013  and  2014,  in  view  of  the  elections,  so  as  to 
support growth in output and jobs, in so far as it is 
able 
investor 
confidence. 

to  do  so  without  damaging 

to  maintain 

flexibility 

some 

in 

Graph II.33.2:Turkey - Public finances

% of GDP 

-8

-6

-4

-2

0

% of GDP

forecast

80

60

40

20

0

07

08

09

10

11

12

13

14

General government debt (rhs)

General government deficit (lhs)

In  view  of  the  weaker  economic  activity  and  the 
diminishing  impact  of  temporary  revenue  streams 
arising  from  a  past  restructuring  of  private-sector 
debt  to  the  state,  the  deficit  of  the  general 
government  is  expected  to  edge  up  from  2.4%  of 
GDP in 2012 to 3-4% of GDP in 2013-14, election 
years.  The  government  debt-to-GDP  ratio 
is 
forecast  to  decline  from  around  40%  of  GDP  at 
end-2011  to  less  than  36%  by  2014,  reflecting 

Candidate Countries, Turkey

moderate  primary 
in
privatisation once  market conditions  improve and
accelerating economic growth in 2014.

surpluses,  a  pick-up 

Inflation trickles down 

On  the  back  of  positive  base  effects  in  the  final
months of 2012, inflation is forecast to slow from
8.9%  at  the  end  of  2011  to  8%  by  late  2012  and
5.8%  in  2014,  compared  with  a  Central  Bank 
target  of  5%  ±2 pps.  for both  years.  In  the  course
of  2013  inflation  is  expected  rise  temporarily  due
to  recent  hikes  in  administrative  prices  and  taxes,
before easing in 2014. 

Job creation slows down

In tandem with the growth slowdown, job creation
is likely to be weaker. Total employment growth is 

forecast to fall from 6.7% in 2011 to 2.3% in 2012
and  between  1%  and  2%  in 2013-14. The  fall  in 
the unemployment rate is expected to continue but
its  pace  is  declining.  The  unemployment  rate  is
projected to fall from 8.8% in 2011 (EU definition)
to 7.5% in 2012, and about 6-7% in 2013-2014.

External imbalances narrowing 

The  rapid  increase  in  Turkey's  current-account
deficit  in  2010-11  has  raised  serious  concerns
about  its  sustainability.  Driven  by  a  credit-fuelled
rise  in  import  demand  and  higher  oil  prices,  it
reached  10%  of GDP  in  2011.  It  is  expected  to
remain relatively large but should ease for most of
2012-14  to  levels  around  7%  of  GDP,  primarily 
owing  to  slower  domestic  demand  growth.  Weak
GDP  growth  in  the  EU,  Turkey's  largest  export
market,  is  expected  to  continue  to  curb  growth in 
external demand for Turkish goods and services. 

Table II.33.1:
Main features of country forecast - TURKEY
2011

Annual percentage change

bn TRY Curr. prices
1294.9

% GDP
100.0

92-08
4.2

2009
-4.8

2010
9.2

2011
8.5

2012
3.0

2013
2.9

2014
3.7

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

920.8

180.7

283.2

-

300.5

397.6

1282.1

71.1

14.0

21.9

-

23.2

30.7

99.0

Domestic demand
Inventories
Net exports

4.1

4.1

5.1

-

8.8

9.5

4.2

4.5

0.1

-0.4

-2.3

7.8

-19.0

-

-5.0

-14.3

-5.0

-5.5

-2.1

2.8

6.7

2.0

30.5

-

3.4

20.7

9.6

11.4

2.3

-4.5

7.7

4.5

18.3

-

6.5

10.6

8.5

10.3

-0.3

-1.5

0.4

3.7

0.6

-

9.7

4.8

3.1

0.9

-0.1

0.8

7.0

8.8

6.7

4.7

8.0

0.4

0.6

6.2

7.5

2.3

10.7

44.5

12.5

39.5

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-10.6

-10.0

-11.3

36.8

10.4

46.1

39.2

45.1

42.4

-9.5

-8.0

-2.4

-1.0

-3.2

-3.9

-1.5

-2.0

-2.1

-6.9

-2.6

-6.4

-2.2

-2.1

-7.5

-3.8

-5.2

-0.5

-3.7

-3.9

8.0

8.0

7.2

1.9

8.3

2.5

4.8

4.1

8.6

5.3

5.7

6.3

8.6

6.5

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

2.0

5.3

2.4

-

5.1

3.5

3.0

2.6

0.0

0.2

1.2

7.0

6.6

4.8

-2.3

-

7.3

7.8

-2.4

-9.3

-6.8

-

-3.2

-

-

3.5

6.6

5.3

-

6.5

8.1

3.8

4.4

0.0

-0.7

1.8

5.9

7.1

5.2

-0.2

-

5.4

5.8

0.0

-9.5

-7.2

-

-3.8

-

-

36.5

35.8

127

Other non-EU Countries 

34.  THE UNITED STATES OF AMERICA 

Subdued growth amid looming fiscal uncertainties 

Growth stuck in low gear 

Following a robust performance in late 2011 (1.0% 
q-o-q  in  the  last  quarter),  the  US  economy 
decelerated  in  the  first  half  of  2012  –  as  a 
disappointing  first  quarter  (0.5%,  q-o-q)  was 
followed by an even weaker second quarter (0.3%) 
and activity indicators for the third suggest only a 
minor  up-tick  in  growth  dynamics.  While  some 
improvements  can  be  discerned  in  certain  sectors, 
the  economy  continues  to  be  held  back  by  a 
factors. 
number  of  external  and  domestic 
Uncertainty remains a key issue for businesses and 
households  –  especially  in  light  of  the  upcoming 
elections  –  as  no  political  agreement  on  the 
pending  "fiscal  cliff"  of  scheduled  tax  increases 
and  spending  cuts  (short-term)  or  a  fully-fledged 
fiscal  consolidation  strategy  (medium  and  long-
term) is yet in sight. 

Graph II.34.1:US - Monthly change in private 
employment and the unemployment rate

thousand 

600

300

0

-300

-600

-900

%

10

9

8

7

6

5

4

02

03

04

05

06

07

08

09

10

11

12

Monthly change in private non-farm employment (lhs)

Unemployment rate (rhs)

Tentative  job  creation,  ambiguous  sentiment 
and improving housing market 

to  weigh 
Looming  policy  uncertainty  seems 
heavily  on  spending  and 
investment.  Private 
consumption  slowed  to  0.4%  q-o-q  in  the  second 
quarter  (from  0.6%  in  the  first)  and  is  likely  to 
remain  soft  until  the  end  of  the  year  given  weak 
income  growth  and  changeable  labour  market 
developments.  Non-farm  job  creation  has  been 
rather volatile in 2012. After posting a very strong 
first  quarter  (225,700  monthly  average)  it  slowed 
to 66,700 in the second quarter to pick up again to 
145,700  in  the  next,  aided  by  the  strongest 

130 

in 

the 

the 

share  of 

quarterly  government  employment  growth  since 
2010. Following readings of just above 8% in the 
first  eight  months  of  the  year,  the  unemployment 
rate  dropped  to  7.8%  in  September,  the  lowest 
since  January  2009.  Improvements  were  also 
registered 
long-term 
unemployment which dropped to 40.0% in August 
(40.1%  in  September),  a  near-three-year  low,  and 
the  employment  rate  which  edged  up  to  58.7%  in 
September, the highest since May 2010. However, 
the activity rate of the population (the share of the 
labour  force  in  total  population)  declined  to  a 
three-decade low of 63.5% in August and was little 
changed  in  September  –  signalling  a  structural 
dimension to the current labour market weakness. 

The  housing  market  appears  to  be  on  a  path  of 
steady  improvement,  with  home  prices  (Case-
Shiller  20-city  Index)  rising  continuously  for  the 
six  straight  months  to  July  and  showing  positive 
year-on-year dynamics in June and July (+1.2) for 
the  first 
time  since  September  2010.  Both 
construction  activity  and  home  sales  continue  to 
rise  robustly,  albeit  from  very  depressed  levels. 
While  recent  improvements  are  unquestionable, 
activity  and  sales  are  still  a  fraction  of  their  pre-
crisis  levels  and  the  sector's  contribution  to  GDP 
(positive  for  five  quarters  now)  remained  well 
below  0.1  pp.  on  average  in  the  first  and  second 
quarter.  

Consumer  confidence  rebounded  in  late  summer 
(after bottoming out in July/August), on improving 
labour and housing market conditions along with a 
stock  market  rally  that  lifted  most  indices  near 
their  pre-crisis  highs  in  October.  Reflecting  these 
of 
improvements, 
Michigan  Sentiment  Index  has  been  rising  since 
August - driven largely by expectations - to reach 
the five-year high of 83.1 in October.  

Reuter's/University 

the 

On  the  other  hand,  sentiment  among  businesses 
remains subdued following the deep plunge it took 
over 
late  spring/early  summer  on  growing 
domestic fiscal uncertainty and euro-area concerns. 
The  ISM  Manufacturing  index  stayed  below  50 
from  June  to  August  signalling  contraction  –  for 
the first time since mid-2009 to rebound to 51.5 in 
September  on  better  new  orders  and  employment 
outlook. The non-manufacturing ISM Index, on the 
other  hand,  rebounded  from  the  30-month  low  of 
52.1  registered  in  June  and  showed  gains  in  the 

three  months  that  followed  to  reach  55.1  in 
September.  

Reflecting 
the  uncertain  outlook,  business 
investment  has  weakened  considerably  over  the 
past  four  quarters,  as  firms,  in  particular  from 
sectors more dependent on government orders, put 
their  investment  plans  (and  capital  goods  orders) 
on  hold  until  the  fiscal  uncertainty  dissipates. 
Private non-residential capital formation slowed to 
0.9%  q-o-q  in  the  second  quarter,  compared  to 
4.4% in the third quarter of 2011 and the weakest 
since the first quarter of 2011. Core capital goods 
orders  (non-defence,  excl.  aircraft)  confirm  the 
slowdown  going  forward  with  the  three-month 
growth  momentum  weakening to a three-year low 
of -5.1% in August.  

Fiscal drag and monetary push 

Fiscal  policy  remains  contractionary.  The  second 
quarter of 2012 was the eighth consecutive quarter 
to  post  contraction  in  government  consumption 
and  investment.  At  the  federal  level,  tighter  fiscal 
policies are confirmed by the final budget data for 
the fiscal year 2012 (ending in September),  which 
showed  a  considerable  narrowing  of  the  fiscal 
deficit (-7.0% of GDP vs. -8.7% in 2011) – a result 
of  both  higher  revenues  and  somewhat  lower 
spending.  By  contrast,  faced  with  the  sub-par 
recovery and weak job creation, the Fed decided to 
loosen  monetary  policy  further  and  launched  the 
third  round  of  quantitative  easing  (QE3)  on  13 
September.  Under  this  programme,  the  Fed  will 
buy  USD  40  bn  in  agency  mortgage-backed 
securities (MBS) per month until the labour market 
outlook improves "substantially"; continue the so-
called Operation Twist (26); and extend its  forward 
guidance  on  monetary  policy  by  six  months 
committing  to  the  "exceptionally  low"  federal 
funds rate (0% to ¼%) until at least mid-2015.   

Fiscal challenges cloud the outlook 

is  nevertheless  expected 

Despite  the  weak  first  half  of  the  year,  an  outsize 
carry-over effect from the robust  fourth quarter of 
2011  growth  means  that  real  GDP  for  2012  as  a 
whole 
to  expand 
moderately at 2.1% (up from 2.0% projected in the 
spring  forecast).  The  estimate  for  2013  is  also 
revised up slightly from 2.1% to 2.3% and growth 
in 2014 is projected to strengthen to 2.6%.  

(26)  Extension  of  the  average  maturity  of  Fed's  holdings  of 
securities  through  purchases  of  longer-term  securities 
against sales of shorter-term ones. 

Other non-EU Countries, The United States of America 

Fiscal  policies  remain  the  primary  source  of 
uncertainty  over  the  forecast  horizon.  In  the  short 
run the upcoming "fiscal cliff" of tax increases and 
spending cuts (worth 4.5-5.0% of GDP) scheduled 
to  kick  in  on  January  1,  2013,  interacts  with  the 
expiration  of  the  debt  ceiling  in  early  2013  and  a 
looming government shut-down after March 2013. 
The primary assumption underlying this forecast is 
that  policymakers  will  manage  to  avert  both  the 
"fiscal  cliff"  and  the  government  shut-down  as 
well  as  raise  the  debt  ceiling  –  regardless  of  the 
outcome of November elections.  However, due to 
the 
ideological 
differences  between  the  two  political  camps,  the 
related  agreement  is  likely  to  be  a  series  of 
temporary  fixes  and  extensions  rather  than  the 
"grand bargain" paving the  way to a fully-fledged 
medium-term  consolidation  plan.  Based  on  past 
efforts and experiences, committing to such a plan 
is likely to take more time and partisan bargaining 
to  come  up  with  a  mutually  acceptable  mix  of 
reforms  to  entitlement  spending,  spending  cuts  in 
other areas (e.g. defence) and a major overhaul of 
the current tax code including, inevitably, revenue 
increases.  

time  constraint  and 

inherent 

Graph II.34.2:US - Home  prices, home sales and new 
housing starts (s.a.)

index, average 2000-05=100
140

index, average 2000-05=100

120

100

80

60

40

20

04

05

08

07

11

10

06

12
09
S&P Case-Shiller 20-city home price index (rhs)
Existing home sales
New home sales
New housing starts

145

135

125

115

105

95

At  this  juncture,  it  is  assumed  that  last-minute 
temporary  solutions  put  together  by  policymakers 
around  the  turn  of  the  year  will  reduce  the  2013 
fiscal  tightening  to  about  one-quarter  of  the 
4.5-5.0% of GDP scheduled to occur in 2013 under 
current  law. This implies a  fiscal consolidation of 
about  1.2%  of  GDP  (slightly  down  from  the  SF) 
that  will  come  predominantly 
from  partial 
expiration  of  scheduled  tax  cuts  and  lower  than-
scheduled spending reductions.  

Housing  and  QE3 
acceleration  

to 

support  gradual 

The  forecast  for  2013  was  revised  up  slightly  to 
2.3%  (from  2.1%  in  the  SF)  because  of  an 

131 

European Economic Forecast, Autumn 2012

of

lower 

assumption 
fiscal
marginally 
consolidation  and  a  positive  effect  of  QE3.  While 
the impact of the latter is not expected to be either 
quick  or  large,  additional  easing may help  boost 
market  and  business sentiment  as well  as firm
recent improvements in the housing sector. To this
end,  the  Fed's  actions  are  likely  to  further  lower 
mortgage rates, spur home buying and thus provide
an additional boost to property prices. This may set
off  a  virtuous  circle  of higher  spending  – 
associated  with  home-buying  but also  through the
wealth effect as households' net worth increases.  

labour  market).  Regarding 

For 2014, GDP growth is expected to accelerate to 
2.6%  –  in  line  with  the  overall  improvement  in
global  activity  and  trade  and  the  consolidation  of
positive  developments  in  the  domestic  market
(housing, 
fiscal
policies, the baseline scenario is similar to that for 
2013  and  involves  partial  agreements  on  selected 
policies 
fiscal
sustainability with  a  coherent  and fully fledged
consolidation programme. Therefore, only gradual
improvements  in  the  fiscal  position  of  the  US  are
expected within the forecast horizon (by 1.2% and 
1.1%  of  GDP  in  2013  and  2014,  respectively).
This will  not  be  enough  to  reverse  the  increasing 
trend  in  the  debt-to-GDP  ratio  and  hence  the

addressing 

rather 

than 

the

principal medium and long-term concern dimming 
the US outlook will remain unaddressed.

Risks still tilted to the downside 

Risks  to  the  outlook  continue  to  be  tilted  to  the 
downside. Domestically they are linked to the risk
of excessive consolidation in the short run ("fiscal
cliff") which – if not averted in time – could throw
the  US  economy  into  recession (27)  and  derail  the
fragile global  recovery.  Domestic  and global
confidence  may  again  suffer 
if  a  damaging
political  stand-off  over  fiscal  policies  is  repeated, 
for example during the next debt ceiling debate or 
negotiations  on  the  extension  of  tax  cuts  and  the
automatic  spending  cuts  ("sequester")  in  early
2013. Any negative signals from the political scene
related  to  these  debates may  also further  weaken
financial  markets'  confidence  in  the  feasibility  of
the necessary medium-term fiscal consolidation.  

(27) Forecasts of the GDP contraction depend on the estimate of
the  associated  fiscal  restraint  and  related  fiscal  multipliers
and  range  from  -0.5%  (CBO)  to  roughly  -2%  (investment 
banks) in calendar year 2013.

Table II.34.1:
Main features of country forecast - THE UNITED STATES

2011

Annual percentage change

bn USD Curr. prices
15044.1

% GDP
100.0

92-08
3.0

2009
-3.1

2010
2.4

2011
1.8

2012
2.1

2013
2.3

2014
2.6

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

10729.0

2688.2

2158.3

1142.3

2094.2

2662.2

71.3

17.9

14.3

7.6

13.9

17.7

15296.0

101.7

Domestic demand
Inventories
Net exports

3.3

1.6

4.3

6.3

5.7

7.1

3.1

3.3

0.0

-0.3

-1.9

4.4

-16.1

-19.6

-9.1

-13.5

-4.1

-3.5

-0.8

1.2

1.8

0.9

-0.5

9.9

11.1

12.5

3.5

1.4

1.5

-0.5

2.5

-2.6

4.0

11.0

6.7

4.8

2.0

1.9

-0.2

0.1

1.9

-1.6

5.7

5.0

4.4

3.8

2.0

1.9

0.1

0.0

2.0

8.9

0.6

1.9

9.3

5.4

1.2

3.8

3.0

9.6

8.2

1.7

-5.0

-0.8

 Employment (*)
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 General index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

109.6

103.5

-10.1

-11.3

-11.9

66.4

90.1

99.2

-0.2

-0.5

-4.9

-3.1

-3.1

-8.5

-1.6

-1.1

-0.4

-0.2

-0.9

-1.6

-0.1

-4.1

-3.3

-3.8

-4.6

-5.0

-3.3

-3.6

-3.3

-3.3

-3.6

-3.3

-3.3

-0.3

-2.8

-0.6

1.9

1.6

8.2

1.8

2.1

6.4

8.4

2.2

2.7

9.4

9.6

0.9

1.3

1.6

3.3

8.6

2.1

3.2

0.0

2.0

-

-

-

-

-

-

-

-

-

-

 (*) Employment data from the BLS household survey. 

132

2.0

-0.4

5.8

6.4

6.2

5.3

2.5

2.2

0.0

0.0

0.7

7.9

3.8

2.2

-0.4

7.8

2.7

2.0

0.1

-4.7

-2.9

-2.9

-7.3

-

-

2.2

0.0

9.4

11.4

6.3

7.6

3.0

3.1

0.0

-0.4

1.1

7.5

3.7

2.1

-0.6

7.4

2.7

2.1

-0.7

-5.1

-2.9

-2.9

-6.2

-

-

112.3

113.3

35.  JAPAN 

Recovery stalling after the solid first half of 2012 

Short-lived  growth 
outlook 

followed  by  uncertain 

After contracting in the first half of 2011 after the 
effects of the March 2011 triple disaster, Japanese 
GDP  grew  for  four  consecutive  quarters,  bringing 
y-o-y  growth  in  the  second  quarter  of  2012  to 
3.2%.  However,  the  recovery  is  likely  to  be 
interrupted  in  the  second  half  of  2012  due  to  a 
deteriorating global outlook.  

Until mid-2012, growth had been driven by private 
consumption,  which  was  up  by  3.7%  y-o-y  in  the 
first  quarter  of  2012  and  by  3.5%  y-o-y  in  the 
second quarter of 2012. The spurt in consumption 
the 
was  made  possible  by  pent-up  demand, 
temporary 
re-introduction  of  purchase 
incentives  for  eco-cars  and  a  number  of  product 
innovations  in  consumer  electronics.  All  these 
elements have subsequently dissipated. In addition, 
recent  wage 
been 
developments 
disappointing. For the rest of the year a decline in 
private consumption is therefore to be expected.   

have 

the 

oriented  companies.  Second,  the  slowdown  in 
China  and  other  Asian  markets  and  the  weaker 
prospects  of  exports 
to  Europe  hold  back 
investments.  Third,  financing  conditions  are  easy 
and  credit  available,  while  real  interest  rates  are 
too high in an environment where profit prospects 
are  subdued.  Fourth,  deflation  has  not  been 
overcome  and  domestic  growth  prospects  remain 
subdued.  

Net  exports  made  a  strong  negative  growth 
contribution  (-0.9  pp.)  in  2011.  They  did  not 
contribute  to  growth  in  the  first  half  of  2012  and 
are expected to give a slight negative contribution 
to  growth  in  the  second  half  of  2012.  The  main 
reason  for  this  development  is  higher  energy 
imports.  The  strong  yen  and  lately  the  slowdown 
in  large  parts  of  Asia  as  well  as  the  escalation  of 
tensions  with  China  and  to  a  lesser  extent  with 
Korea are also likely to negatively affect exports.  

Outlook for 2013 and beyond 

in 

the 

Public investment has been the second pillar of the 
strong  growth 
first  half  of  2012. 
Reconstruction efforts intensified at the beginning 
of 2012 and public investment grew by 3.6% q-o-q 
in the first and by 1.8% q-o-q in the second quarter 
of 2012. It is projected to slow down in the second 
half  of  2012  because  of  delays  in  approval  of  the 
deficit-financing bills in the upper house.  

Government  consumption  grew  strongly  (1.1% 
q-o-q)  in  the  first  quarter  of  2012  and  edged  up 
(0.2% q-o-q) in the second quarter. Looking ahead, 
some  payback  and  the  effects  of  expenditure 
restraint  are  likely  to  cause  a  slight  decline  in 
government  consumption  in  the  second  half  of 
2012. 

Private  non-residential  investments  have  not  yet 
recovered  from  their  steep  declines  in  2008  and 
2009  and  are  more  than  15%  below  their  peak. 
They increased by 5.5% q-o-q in the  final quarter 
of 2011. After a decline (-1.6% q-o-q) in the  first 
quarter  of  2012  non-residential 
investment 
increased again (1.4% q-o-q) in the second quarter. 
For the second half of 2012 private non-residential 
investment  is  expected  to  decline.  Several  factors 
are  holding  back  a  recovery.  First,  the  strong  yen 
hampers  exports  and  profit  prospects  of  export 

Given  the  expected  growth  profile  in  2012,  the 
carry-over  for  2013  will  be  negative.  As  a  result 
growth  for  the  calendar  year  is  likely  to  be  weak 
although the q-o-q growth is expected to be fairly 
positive  in  most  quarters  of  2013.  Two  major 
factors should support growth in 2013. First, there 
will  probably  be  no  further  autonomous  factors 
driving  up  imports.  Second,  in  the  second  half  of 
the 
private 
consumption is anticipated due to the consumption 
tax  hike  scheduled  for  April  2014.  For  the  same 
reason, private consumption is also expected to be 
weak in the second and third quarter of 2014. The 
last consumption tax hike from 3% to 5% in 1997 
already led to a front-loading of consumption. 

front-loading 

some 

year 

of 

to  deflation  and 

Non-residential  investment  is  expected  to  grow 
in  2013  and  beyond.  Despite 
moderately 
headwinds  due 
the  global 
economic  situation  an  improvement  of  export 
prospects  and  of  sentiment  for  manufacturing 
companies  are  expected  to  lift  non-residential 
in  2013  and  2014.  In  addition, 
investment 
investment 
in  energy  efficiency  could  drive 
investment  

133 

European Economic Forecast, Autumn 2012

Public  investment  and government  consumption
are expected to grow only slightly due to necessary
consolidation  efforts.  Reconstruction work will
continue but the gradual decline of ordinary public
investments which started a decade ago is likely to 
continue as well. 

electronics  possibly  send  Japan's  exports  down.
Consumption  could  be  weaker  than  expected  in 
case  the  debate  about  welfare  reform  and  the
looming  loss  of  purchasing  power  due  to  the
consumption  tax  hike  results  in  a higher  saving
rate.  

Downside risks outweigh upside risks 

A weakening  in  the  yen  and/or  lower  oil  prices 
would  likely  result  in  higher  investments  and
higher net  exports.  Growth  could  also  be  higher
due 
than
anticipated  prior  to  the  consumption  tax hike  in
April 2014.

front-loading  expenditure  more 

to 

Downside  risks  outweigh  upside  risks  in  the
current environment. Exports could be under more 
pressure  due  to weak  demand  in key  export
markets.  Further  losses  in market  share  due  to 
more 
by
competitors   in   some   markets   like   consumer  

competitiveness 

product-related 

Graph II.35.1:Japan - GDP growth and contributions

pps.

3

2

1

0

-1

-2

-3

-4

-5

08Q1 08Q3 09Q1 09Q3 10Q1 10Q3 11Q1 11Q3 12Q1
Household consumption
Private non-residential investments
Net Exports
GDP growth (y-o-y%)

Table II.35.1:
Main features of country forecast - JAPAN
2011

Annual percentage change

bn JPY Curr. prices
468191.2

% GDP
100.0

92-08
1.0

2009
-5.5

2010
4.5

2011
-0.8

2012
2.0

2013
0.8

2014
1.9

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

282771.4

96694.4

96910.6

-

71273.0

75600.0

60.4

20.7

20.7

-

15.2

16.1

482890.9

103.1

Domestic demand
Inventories
Net exports

1.1

2.3

-1.0

-

5.3

3.7

1.1

0.7

0.0

0.3

-0.7

2.3

-10.6

-

-24.2

-15.7

-6.1

-2.4

-1.6

-1.5

2.6

2.2

0.1

-

24.3

11.2

4.4

2.1

0.8

1.7

0.1

2.0

0.8

-

-0.1

6.3

-0.3

0.6

-0.5

-0.9

2.3

1.6

3.2

-

2.5

6.3

2.2

2.3

0.2

-0.5

0.3

4.6

1.7

5.1

4.0

0.0

5.1

4.8

-1.2

-3.7

-0.1

-1.6

-0.5

-0.2

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 General index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

240.6

137.2

233.2

215.3

210.2

16.1

13.9

-1.6

-1.6

-0.2

-3.9

-1.5

-8.3

-4.5

-2.4

-7.1

-8.0

-0.3

-0.4

-1.4

-0.7

-0.7

-0.5

-2.2

-2.1

-4.7

-8.8

-8.4

-7.8

-0.5

-2.6

0.5

0.0

0.9

0.8

8.2

0.3

0.8

7.4

0.3

2.4

2.9

2.8

9.1

0.9

1.7

2.8

3.6

2.7

3.5

2.0

1.9

8.9

2.9

5.1

0.5

-

-

-

-

-

-

-

-

-

-

134

0.4

0.1

1.6

-

0.7

-0.4

0.9

0.6

0.0

0.2

0.1

4.7

1.2

0.4

1.4

10.2

-0.9

-0.1

0.0

-1.4

1.1

1.0

-7.9

-

-

1.1

0.5

1.9

-

3.9

1.0

1.9

1.1

0.3

0.5

0.1

4.6

1.2

-0.6

-1.1

10.7

0.4

0.2

-1.4

-1.2

1.3

1.2

-7.7

-

-

249.5

250.8

36.  CHINA 

Mixed signals for the short term, while structural challenges remain 

A faster than expected slowdown 

China's growth has slowed  more rapidly than  was 
anticipated in the spring forecast, with growth rates 
of 8.2%, 7.6% and 7.4% (y-o-y) over the first three 
quarters of 2012. Weakness has been seen in both 
internal  and  external  demand.  Growth  in  exports 
and imports has ground to a halt in recent months, 
with  year-on-year  growth  rates  dropping  to  close 
to  zero.  Growth  rates  for  domestic  industrial 
production,  retail  sales  and  fixed  asset  investment 
all declined fairly steadily through the first half of 
the year.  

The  slowdown  was  partly  a  response 
to  a 
deliberate  policy  of  monetary  tightening  during 
2011. China raised policy rates five times between 
October  2010  and  July  2011  to  counter  a  steady 
increase in inflation, and to dampen credit growth 
and  property  prices  in  an  overheating  real  estate 
sector. The RMB real effective exchange rate was 
also  allowed  to  appreciate  by  around  7%  during 
the course of 2011. These measures largely proved 
inflation  fell  back 
effective.  Consumer  price 
sharply, from a peak of 6.5% in July 2011, to just 
below  2% 
in  September  2012.  Real  estate 
investment and property prices fell as the domestic 
real estate bubble deflated.  

It seems likely that the pace of the slowdown was 
faster  than  the  Chinese  authorities  had  expected. 
Trade  growth  has  proved  surprisingly  slow,  and 
there  has  been  a  protracted  weakness  across  a 
range of economic and sentiment indicators, with a 
sequence  of  weak  PMI  readings  to  go  alongside 
below-consensus  data  readings  through  much  of 
the first three quarters. In June, the People's Bank 
of China introduced the first cut in headline policy 
rates  for  three  years,  followed  by  a  further  cut  in 
July,  together  reducing  headline  rates  by  50  bps. 
There  has  also  been  an  acceleration  by  the 
National  Development  and  Reform  Commission 
(NDRC) 
infrastructure 
investment.   

approvals 

for 

of 

Is a stabilisation of growth in sight?  

Despite  the  string  of  disappointing  data,  there  are 
some  tentative  signs  of  stabilisation  of  growth. 
Retail  sales  and  fixed  asset  investment  have  seen 
their  year-on-year  growth  rates  stabilise  over  the 
last  2  to  3  months.  There  has  also  been  a  slight 

prices 

readings 
have 

pick-up  in  credit  growth.  However  there  are  no 
clear signs as yet of any significant bounce back in 
remain  weak,  while 
activity.  PMI 
deflationary, 
turned 
producer 
suggesting  significant  pressure  on  profitability  in 
industrial sectors. While a relatively "soft landing" 
is  not  out  of  reach  for  the  Chinese  economy,  the 
recent  data  only  provides  a  limited  case  for 
optimism.  

The external outlook 

The  external  sector  seems  unlikely  to  contribute 
greatly  to  Chinese  growth  in  the  near  term.  The 
effective  exchange  rate  of  the  RMB  has  been 
relatively  stable  through  2012,  while  the  outlook 
for China's main export markets is that growth will 
remain  subdued,  and  that  export  growth  will 
therefore 
remain  modest.  Falling  domestic 
producer  prices  may  allow  for  some  capture  of 
market share, but structural factors – including the 
rise of other low cost producers in the region – are 
working against China in this respect.  

Graph II.36.1:China - Trade growth

y-o-y%

100

80

60

40

20

0

-20

-40

-60

07

08

09

10

11

12

Exports

Imports

The domestic outlook 

Given the weakness of external demand, and likely 
sluggish demand from the domestic private sector, 
the  current  outlook  for  China  largely  hinges  on 
whether  reported  measures  to  accelerate  public 
investment  projects,  and  some  targeted  fiscal 
measures  directed  towards  consumers,  will  prove 
sufficient to generate a substantial improvement in 
domestic prospects. In recent weeks the NDRC has 
approved  a  number  of  infrastructure  projects, 
reportedly  worth  around  2.5%  of  GDP.  These  are 
not  entirely  new  projects,  but  their  accelerated 
to  help  underpin  a 
approval 

is  expected 

135 

European Economic Forecast, Autumn 2012

raises 

stabilisation  of  growth  through  to  the  end  of  this
year.  Consumer  spending  should  also  prove  fairly
resilient. Real interest rates have risen as inflation
has  dropped  back,  which 
to
households,  who  keep  a  substantial  part  of  their
wealth in the form of bank deposits. Together with
the continued steady growth of wages, this should
prevent  a  sharp  slowdown 
in  consumption 
spending. For these reasons growth is expected to 
be  around  7.7%  in  2012,  with  a  similar  level  of 
growth for 2013 and 2014. 

returns 

Risks to the outlook

There  remain  downside  risks  from  the  US  fiscal
cliff,  or  a  worsening  of  the  euro-area  economic
outlook.  However,  the  most critical  determinants
of Chinese growth in the short term are likely to be
internal. The relatively low weight of consumption
demand  in the  economy means  that  domestic
developments  remain heavily  dependent  on  more
idiosyncratic  components  of  demand.  At  some
point  a  sharp  structural  break  in  investment may 
arise, driven by profitability concerns. The forecast
does  not incorporate  a sharp  fall in  investment

demand  over  the  forecast  horizon,  but  rates  of
investment  close  to  50%  of  GDP  cannot  be
sustained indefinitely without raising the prospects 
of  a  substantial  squeeze  on  profits.  An  additional
structural  issue  is  the  sustainability  of  local
government  finances which  are currently  partly 
dependent on asset sales. 

retain 

The  Chinese  government 
room for 
manoeuvre  to  counter negative  shocks  with  a
budget  deficit  below  2%  of GDP.  The  imminent
leadership change in party leadership in November 
this year  may  affect  the  size  and  scope  of  any
policy responses. 

The forecast for 2013-14 suggests that China may
be  in  the  process  of making  a  step  shift  to  a 
materially lower growth rate than the past decade.
Such an adjustment to a lower trend growth rate is 
likely  to  prove  beneficial,  provided  it  is  the
product of a  significant  rebalancing of
the
an  overreliance  on
from 
economy 
away 
investment,  and 
levels  of
towards  higher 
consumption  and  more  emphasis  on  less  resource
intensive and capital intensive economic growth.  

Table II.36.1:
Main features of country forecast - CHINA

2011

Annual percentage change

92-08
10.3

2009
9.2

2010
10.4

2011
9.3

2012
7.7

2013
7.7

2014
7.8

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Change in stocks as % of GDP
 Exports (goods and services)
 Final demand
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

bn CNY Curr. prices
46547.8

16223.8

6192.8

21519.7

-

-

13446.1

-

12226.1

-

% GDP

100.0

34.8

13.3

46.2

-

-

28.9

-

26.2

-

Domestic demand
Stockbuilding
Foreign balance

14.9

16.2

18.6

-

-

16.6

-

17.6

-

-

-

-

9.4

8.1

23.5

-

-

-4.2

-

4.5

-

-

-

-

7.1

9.8

11.6

-

-

20.3

-

20.7

-

-

-

-

10.0

10.4

9.6

-

-

8.1

-

9.4

-

-

-

-

-

4.1

0.4

3.4

0.4

0.9

4.3

0.3

 Employment
 Unemployment (a)
 Compensation of employees/head
 Unit labour costs
 Real unit labour costs
 Saving rate of households
 GDP deflator
 Private consumption deflator
 Index of consumer prices (c)
 Merchandise trade balance (b)
 Current-account balance (b)
 Net lending(+) or borrowing(-) vis-à-vis ROW (b)
 General government balance (b) 
 General government gross debt (b)
 (a) urban unemployment, as % of labour force.  (b) as a percentage of GDP. (c) national indicator.

-0.6

-0.7

-2.3

-1.7

-1.2

-1.3

5.6

5.9

5.3

3.4

5.4

2.9

5.0

3.4

5.2

2.8

4.1

5.8

3.3

4.3

5.2

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

136

-

-

-

-

-

5.3

-

5.2

-

-

-

-

-

-

-

-

-

-

2.0

-

2.5

2.8

-

-

-

-

-

-

-

-

3.9

-

3.9

-

-

-

-

-

-

-

-

-

-

2.0

-

-

2.5

2.7

-

-

-

-

-

-

-

-

5.0

-

5.0

-

-

-

-

-

-

-

-

-

-

2.0

-

-

2.4

2.6

-

-

-

37.  EFTA 

Resilience put to the test 

Switzerland 

and  Liechtenstein(28)
Norway, 
continue  their  remarkable  resilience  to  the  euro-
area  sovereign-debt  crisis.  That  is  not  to  say  that 
the  crisis  has  no  effect  on  the  economic  outlook, 
on  the  contrary.  There  is  a  fall-out  in  external 
demand  from the euro area and there has been an 
impact  on  economic  sentiment,  in  particular  in 
Switzerland. However, the impact has not been as 
severe as the strong ties with the European Union 
would suggest. This resilience was identified in the 
spring  forecast  to  have  a  common  origin  in 
exceptionally low domestic interest rates linked to 
the  safe  havens  status  of  these  countries  and  their 
ability to tap into demand from new growth poles.  

140

120

100

80

60

40

20

0

Graph II.37.1:EFTA - REER and interest rates

07Q1=10

%

07

06

05

04

03

02

01

00

06

07

08

09

10

11

12

CHF 3m interbank (rhs)

NOK 3m interbank (rhs)

CHF REER  (lhs)

NOK REER (lhs)

For both Switzerland and Norway, domestic yields 
continue  to  be  very  low  in  a  context  of  a  strong 
currency.  Domestic  demand  is  supported  both 
directly through lower lending rates for corporates 
and  households  and  indirectly  through  the  wealth 
effect.  The  benefit  of  export  diversification 
towards new markets is waning for Switzerland as 
the economic growth of the emerging economies is 
also  coming  under  pressure.  Norway's  exports  are 
still  boosted  by  oil  prices  at  an  elevated  level 
which  also  have  strong  impetus  on  domestic 
demand  through  the  investment  in  the  oil  sector. 
As  a  consequence,  Norway's  business  cycle  is 
decoupling 
area  whereas 
Switzerland's business cycle cools down. 

from 

euro 

the 

(28)  Although  Switzerland  and  Liechtenstein  are  two  separate 
countries  and  there  are  important  differences  between 
them,  in  terms  of  economic  development  they  are  highly 
comparable  and  in  this  forecast  Liechtenstein  is  taken  as 
part of the forecast for the Swiss economy. The economic 
outlook  for  Iceland  is  discussed  separately  because  of  its 
candidate country status. 

Swiss business cycle cools down

The  Swiss  economy  continues  to  outperform  the 
euro-area economy in spite of its high dependency 
on  the  economic  developments  in  the  euro  area. 
The  safe-haven  status  of  Switzerland  has  led  to 
capital inflows, which resulted in a fall in domestic 
that  supported  domestic  demand  both 
yields 
through  lower  borrowing  costs  and  an  increase  in 
asset  values  (including  real  estate).  Swiss  exports 
are  concentrated  in  a  few  categories  with  a  low 
price  elasticity  which  helps  to  offset  part  of  the 
pressure  from  appreciation.  For  instance,  in  the 
export of financial services the competitive edge of 
Switzerland  lies  not  only  with  its  solid  banking 
history  and  large  global  banks  but  also  with  bank 
secrecy  and  tax  advantages.  In  goods  trade,  the 
Swiss also have a competitive edge in some niche 
markets  with  a 
remarkable  contribution  by 
commodity  traders  like  Vitol,  a  global  player,  to 
Swiss economic strength. 

Irrespective of its competitive edge, Switzerland is 
neither  immune  to  economic  developments  in  the 
EU  nor  to  developments  in  the  rest  of  the  world 
economy. With the strength of the recovery outside 
the euro area waning, its exports are coming under 
pressure as is becoming increasingly visible in the 
declining  contribution  of  net  trade  to  economic 
growth.  For  the  rest  of  2012,  the  Swiss  economic 
outlook  is  clouded  by  the  effect  of  external 
developments on foreign demand. 

Domestic  demand  will  continue  to  provide  the 
main thrust to the Swiss economy throughout 2012 
supported  by  very  low  interest  rates,  which  also 
are a consequence of the financial turmoil outside 
Switzerland,  and  an  inflow  of  high  wage  earners. 
These  factors  will  continue  to  drive  domestic 
demand  albeit  at  a  diminishing  rate  as  the  safe 
haven effect on domestic demand wanes. By then, 
however, the fundamentally strong position, like in 
the labour market, of the Swiss economy will help 
drive the economy. 

The positive growth surprises in the fourth quarter 
of  last  year  and  the  first  quarter  of  this  year  are 
signs  of  the  volatility  that  the  Swiss  economy  is 
confronted  with.  Also,  because  of  the  statistical 
effect  these  positive  surprises  will  support  the 
annual  growth  figure  this  year.  At  the  same  time, 
the disappointing GDP figure in the second quarter 

137 

European Economic Forecast, Autumn 2012 

(-0.2%  q-o-q,  0.5%  y-o-y)  warrants  a  more  sober 
outlook  for  the  Swiss  economy  for  the  rest  of  the 
year.  It  has  confirmed  our  expectations  in  spring 
that  net  exports  turn  into  a  drag  on  GDP  growth 
throughout  2012.  Already,  labour  market  reports 
have  become  less  positive  although  the  2.8% 
unemployment rate in September seems to indicate 
mostly friction unemployment. 

As  the  world's  recovery  again  accelerates  in  2013 
and  pressure  will  come  off  the  Swiss  franc,  the 
Swiss  economy  will  see  its  external  demand  rise 
for  both  its  high  value  added  export  products  and 
the more basic industries. This should increasingly 
provide  impetus  to  economic  growth  going  into 
2014 when economic growth is foreseen at slightly 
above potential. 

The strong Swiss Franc issue 

The Swiss franc has traded mostly close to the 1.20 
ceiling  against  the  euro  since  its  introduction  by 
the  Swiss  National  Bank  in  September  2011. 
However, the Swiss franc depreciated significantly 
in  real  effective  terms  since  the  Swiss  National 
Bank (SNB) given the euro’s generalised weakness 
between  March  and  July  against  major  currencies 
(JPY,  USD,  GBP).  Nonetheless,  the  franc  will 
continue  to  play  a  significant  safe-haven  role  as 
proved  by  the  significant  capital  inflows  into 
Switzerland.  The  fact  that  the  exchange  rate  has 
stayed very close to the lower bound of 1.20 shows 
that 
remains  an 
important risk. 

renewed  upward  pressure 

As a consequence of the high-valued Swiss  franc, 
prices  have  been  under  downward  pressure 
regardless of robust domestic demand. For 2012, a 
small decline in the general price level is expected. 
This  is  particularly  visible  in  the  core  inflation 
which  will  support  real  disposable  income.  In  the 
coming  two  years,  as  monetary  conditions  are 
expected  to  gradually  return  to  normal,  inflation 
should rise again to moderate levels. 

There  are  two  major  risks  to  the  outlook  for  the 
Swiss economy. A first risk is the development of 
an  asset  bubble,  in  particular  in  housing,  as  a 
consequence  of  yields  persistently  below  the 
equilibrium  level.  Such  an  asset  bubble  would 
affect  bank  balance  sheets  and  could  create 
financial  instability.  A  second  risk  is  a  sudden 
reversal  in  external  financial  conditions,  like  an 
evaporation of the safe haven status, which would 
lead to a sharp depreciation of the Swiss franc and 

138 

difficulties for the SNB to undo its loose monetary 
policy  in  time.  In  this  rather  unlikely  scenario, 
inflationary pressures would increase, eroding real 
disposable income  while the  associated lower real 
interest rates would drive an unsustainable increase 
in households' net wealth. Again, this would entail 
risks for Swiss financial stability. 

Norway's business cycle decouples 

is  fuelling  growth 

the 
in 
Domestic  demand 
Norwegian  economy,  helped  by 
favourable 
domestic  conditions  and  a  thriving  oil  sector. 
Strong  wage  and  employment  growth,  along  with 
very  low  inflation  and  interest  rates,  are  currently 
boosting  consumer  purchasing  power.  Private 
consumption  growth  in  the  first  half  of  2012  was 
very  high  (2%  on  the  second  half  of  the  previous 
year, seasonally, adjusted). Moreover, higher level 
for 
of  disposable 
continued  strong  labour  market  ensure  sustained 
consumption growth in 2012 and into 2013. Higher 
interest  rates  and  a  moderation  of  employment 
growth  are  forecast  to  slow  down  consumption 
growth gradually in 2013 and 2014.  

income  and  expectations 

Gross fixed capital formation gained momentum in 
the second quarter of 2012. An appreciating krone, 
coupled  with  higher  profitability  in  the  off-shore 
sector  due  to  high  oil  prices,  is  increasingly 
attracting international capital flows. The resulting 
exceptionally  strong  growth  in  Norwegian  oil 
investment  is  projected  to  slow  down  during  the 
forecast  period,  but  it  will  remain  high,  provided 
that  high  oil  prices  and  low  interest  rates  are 
sustained.  

Export  growth  is  expected  to  recover,  despite  the 
strong  exchange  rate,  aided  by  strong  growth  of 
hydrocarbons exports and Norway's relatively low 
reliance on Europe for them (Norway's oil exports 
are in excess of 40% of total exports, half of which 
are  absorbed  by  the  EU).  However,  stronger 
imports,  in  line  with  growth  of  domestic  demand, 
the  external  sector's 
are  expected 
contribution to GDP growth. 

limit 

to 

GDP  growth  above  trend  and  inflation  below 
target: room for monetary policy? 

The krone appreciation and resulting lower import 
prices  have  kept  inflation  low,  registering  only 
0.6%  on  average  during  the  first  seven  months  of 
2012,  despite  high  global  energy  costs,  strong 
economic  growth  and  rapid  wage  growth.  The 

Other non-EU Countries, EFTA

stay  below  the  central  bank's  target  of  2.5%. 
However,  too  sharp  interest  hikes  might  only 
strengthen  the  krone  to  levels  that  would  cause
inflation to drop further below target.  

Downside risks to the outlook for Norway

interest 

the  domestic 

Turmoil  in  financial markets  of  other  advanced
economies  could  raise  capital  flows  into  Norway
causing  a  further  appreciation  of  the  krone  while
rate  below
pushing 
equilibrium  levels.  This would  enhance  risks  of
asset  bubbles,  which  are  especially worrisome  for 
the property markets where prices are already high,
and  are  mirrored 
indebtedness  of 
households.  On  the  other  hand,  a  possible  sharp 
escalation  of  the  euro  crisis and  a  new financial
crisis could result in much tighter credit standards,
which  is  one  of  the main  risks  to  the  Norwegian
economy.

in  high 

strong  krone  is  expected  to  keep  inflation  below
1%  in  2012.  In  subsequent years,  as  global
prospects improve and pressures on the krone ease,
the  central  bank  is  expected  to  raise  interest  rates
in  response  to Norway's  domestic  imbalances:
rapid increases of house prices and credit. 

Whereas  strong  production  growth  is  expected  in
the  years  ahead,  no major  labour  shortages  are
foreseen thanks to high immigration flows, except 
for  anecdotal  shortages in  some  skilled areas.
Consequently, wage  growth  should not  pick  up
sharply, but  still remain relatively high during the 
forecast period.

While  economic strength  and  high wage growth
continue, inflation is forecast to gradually increase
throughout the forecast period, yet it is expected to  

Table II.37.1:
Main features of country forecast - EFTA

Norway

Switzerland

2010
0.7

2011
1.4

2012
3.1

2013
2.5

2014
2.3

2010
3.0

2011
1.9

2012
1.0

2013
1.4

2014
1.9

 (Annual percentage change)
 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

Domestic demand
Inventories
Net exports

3.7

1.7

-5.2

-4.2

1.8

9.9

1.3

0.9

1.9

-2.1

2.4

1.5

6.4

0.1

-1.4

3.5

2.0

2.6

0.3

-1.6

2.5

1.9

7.2

5.0

3.6

4.9

3.0

2.9

0.0

0.1

2.4

2.2

4.5

4.5

2.5

3.2

2.6

2.4

0.0

0.1

2.3

2.2

2.9

2.9

2.4

2.6

2.3

2.0

0.0

0.3

1.6

0.7

4.8

6.4

7.8

7.4

6.7

1.9

0.1

1.0

1.2

2.0

4.0

5.1

3.8

4.2

-1.3

1.7

-0.1

0.3

2.1

2.3

0.9

1.5

1.1

3.2

-0.3

1.6

0.1

-0.8

1.8

1.4

1.2

2.5

0.7

1.2

2.7

2.7

4.5

4.0

4.0

4.1

4.6

3.1

3.8

4.2

3.2

3.1

3.0

3.3

3.6

3.9

-3.1

-0.1

-1.6

-0.8

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 Harmonised index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

13.4

13.2

11.3

14.6

16.4

16.4

13.7

12.2

12.4

13.4

13.3

12.4

14.3

14.3

15.1

11.5

11.2

14.2

14.3

14.3

10.8

14.1

13.7

43.4

28.1

26.8

15.7

13.3

14.3

14.3

13.9

28.6

13.1

13.7

14.5

14.4

13.7

27.4

-3.1

-3.6

-0.7

-2.0

1.2

1.3

2.9

1.9

6.4

1.2

6.3

1.2

1.8

2.5

0.5

0.2

2.3

1.0

1.5

2.4

0.6

0.1

2.4

2.5

0.3

0.5

0.3

0.7

0.9

1.6

1.5

0.4

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-2.0

12.5

3.7

-0.9

4.6

3.4

10.8

10.7

0.2

0.9

4.3

1.6

1.6

-

-

-

1.4

1.5

0.4

-0.5

2.3

2.0

2.0

1.0

0.0

0.4

1.0

4.3

2.6

2.1

0.1

13.4

2.0

0.3

-0.4

3.4

10.9

10.8

0.4

-

-

-

1.7

2.5

0.7

0.8

3.8

3.6

1.9

1.4

0.0

0.6

1.8

3.4

2.0

1.8

-1.1

12.8

2.9

1.6

-0.4

3.3

10.5

10.4

0.6

-

-

-

139

38.  RUSSIAN FEDERATION 

Continuing on a moderate growth path 

Russia  recovered  well  from  the  global  economic 
crisis,  posting  real  growth  rates  above  4%  since 
2010.  In  2011,  real  GDP  grew  by  4.3%  y-o-y. 
Growth was particularly strong in the third quarter 
(5.4%, y-o-y) and last quarter (4.9%).  

Unemployment  falls  to  record  low  levels  in 
mid-2012 

In  the  first  quarter  of  2012,  annual  GDP  growth 
was 4.9% y-o-y and moderated to 4% y-o-y in the 
second  quarter.  However,  this  comparative  good 
performance  is  mostly  due  to  the  carry-over  from 
the  last  semester  of  2011.  Quarter-on-quarter,  the 
economy grew only 0.6% (seasonally adjusted) in 
the  first  quarter  of  2012  and  0.1%  in  the  second. 
Despite  slow  recorded  growth  in  the  first  part  of 
2012, 
to 
decrease  and  in  July  reached  its  lowest  level 
(5.4%)  since  2009.  Industrial  production  from 
January  to  July  2012  was  on  average  3.2%  above 
the  level  of  the  previous  year,  but  dropped  in 
August to 2.1%, mostly because of slowing growth 
in manufacturing. 

the  unemployment 

rate  continued 

Graph II.38.1:Russia - real GDP

y-o-y%

4.0

3.0

2.0

1.0

0.0

-1.0

-2.0

-3.0

-4.0

-5.0

06

07

08

09

10

11

12

Source: Federal Statistic Service of Russia

Private  consumption  grew  by  1%  (seasonally 
adjusted, q-o-q) in the first quarter of 2012 and by 
1.2%  in  the  second  quarter.  Investment  spending 
grew  by  respectively  2.8%  (seasonally  adjusted, 
q-o-q) in the first quarter of 2012, and by 2.9% in 
the second.  

Graph II.38.2:Russia - Consumer expenditure and 
Fixed capital formation

dim?

120

115

110

105

100

95

90

85

Jan-11 Apr-11

Jul-11

Oct-11

Jan-12 Apr-12

Jul-12

Consumer expenditure

Fixed capital formation

Source: Central Bank of Russia

Exports of natural gas are contracting 

After  contracting  in  volumes  and  growing  in 
values  during  most  of  2011,  exports  of  crude  oil 
and  oil  products  increased  both  in  volumes  and 
values  in  the  first  quarter  of  2012  and  remained 
stable in the second quarter.  

Exports of natural gas contracted in the first half of 
2012 both in values and volumes, reflecting lower 
demand  from  main  trading  partners  and  a  drop  in 
prices  after  the  peak  of  the  last  quarter  of  2011. 

Graph II.38.3:Russia - Exports of Oil and Gas

y-o-y%

120

100

80

60

40

20

0

-20

-40

-60

06

07

08

09

10

11

12

Oil - Volumes

Gas - Volumes

Oil - Values

Gas - Values

Source: Russian customs service

Reflecting  also  these  patterns,  export  volume 
growth will be limited to 3.6% annually in 2012.  

Inflation picks up again in August 

At  the  same  time,  the  trade  balance  decreased  by 
-5.5% q-o-q in the first quarter of 2012 and -5.8% 
in the second quarter, reflecting the overall drop in 
exports  by  1.4%  (seasonally  adjusted)  in  the  first 
half  of  2012,  and  the  growth  of  imports  by  2.2% 
(seasonally adjusted) in the same period. 

In 2012, headline inflation remained subdued until 
May  (3.6%  y-o-y),  but  subsequently  picked  up 
(September 6.5% y-o-y) on the back of the hike in 
food  prices  caused  by  droughts  in  Russia  and  the 
USA, and of increases in tariffs. The Central Bank 
of  Russia  publicly  stated  already  in  August  that 

140 

Other non-EU Countries, Russian Federation

respecting  the  inflation  target  range  of  5-6% for 
2012  will  be  difficult  and  lent strength  to  this
concern by increased its refinancing rate by 25bps
to 8.25% in September. 

Fiscal  consolidation  continues  and  non-oil
deficit is set to slowly diminish

The Russian federal budget was in surplus in 2011 
(0.8%  of  GDP),  for  the  first  time  since  2008.  It
remained  in  surplus  also  in  the  first  half  of  2012.
Although  oil  and  gas  revenues  decreased  slightly
because of the decline in oil prices, an increase in 
non-fuel revenues more than compensated for this
loss. Fiscal policy for 2013-15  will be based on a 
new fiscal rule, which limits budgetary spending in
line with movements in oil prices. 

In  September,  the  Finance  Ministry  released  the 
new draft general budget for the period 2013-15. 

the 

rule 

incorporates 

This  budget 
linking 
expenditure to oil prices, resulting in further fiscal
consolidation  and  a  progressive,  albeit  slow,
reduction  in non-oil  deficits.  The  non-oil  budget
deficit is set to remain high in 2012 (around 11%
of  GDP)  and  it  is  expected  to  decline  to  around
10% in 2013 and 8.5% in 2014. 

Looking forward

The Russian economy is forecast to continue on a
moderate  growth  path  at  a  rate  of  3.7%  in  2012,
revised  upward  from  3.6%  in  the  spring  forecast.
GDP is expected to grow at a rate of 3.9% in 2012
and 4% in 2014.

Export  volumes  are  expected  to  increase  in  2013
(4.5%  y-o-y)  and  2014  (5.3% y-o-y),  reflecting 
improvements  in the  global  economic  outlook,
while domestic demand and imports will grow at a
slower 
less
accommodating fiscal stance.  

reflecting 

partly 

pace, 

a 

Table II.38.1:
Main features of country forecast - RUSSIA
2011

Annual percentage change

bn RUB Curr. prices
54585.6

% GDP
100.0

92-08
-

2009
-7.8

2010
4.3

2011
4.3

2012
3.7

2013
3.9

2014
4.0

 GDP
 Private consumption
 Public consumption
 Gross fixed capital formation
  of which :     equipment
 Exports (goods and services)
 Imports (goods and services)
 GNI (GDP deflator)
 Contribution to GDP growth :

27473.3

9781.6

11159.5

4178.9

16949.6

12165.9

52838.9

50.3

17.9

20.4

7.7

31.1

22.3

96.8

Domestic demand
Inventories
Net exports

-

-

-

-

-

-

-

-

-

-

-5.1

-0.6

-14.7

-

-4.7

-30.4

-8.1

-5.8

-7.3

5.2

5.1

-1.4

6.4

-

7.0

25.8

4.3

3.8

4.1

-3.3

6.7

1.5

8.4

-

0.4

20.3

4.4

5.5

3.0

-4.3

5.4

2.2

9.3

6.0

3.6

10.8

3.6

5.0

0.0

-1.3

-

-

-

-

-

6.6

1.0

0.6

8.2

8.5

7.5

6.4

0.3

-1.8

 Employment
 Unemployment rate (a)
 Compensation of employees/head
 Unit labour costs whole economy
 Real unit labour costs
 Saving rate of households (b)
 GDP deflator
 General index of consumer prices
 Terms of trade of goods
 Merchandise trade balance (c)
 Current-account balance (c)
 Net lending(+) or borrowing(-) vis-à-vis ROW (c)
 General government balance (c)
 Cyclically-adjusted budget balance (c)
 Structural budget balance (c)
 General government gross debt (c)
 (a) as % of total labour force. (b) gross saving divided by gross disposable income.  (c) as a percentage of GDP.

-32.6

11.5

11.3

11.7

13.8

12.1

22.0

11.6

11.8

15.8

21.2

10.2

10.7

16.5

-4.0

-5.1

-1.0

7.1

7.7

0.2

9.3

3.6

3.0

0.3

7.8

8.4

9.1

3.0

4.8

2.0

6.9

5.3

1.3

4.0

4.8

5.4

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

-

4.5

1.9

7.6

6.0

4.5

9.2

3.9

4.3

0.4

-0.8

0.3

6.2

-

-

-

-

7.3

7.4

4.0

9.0

3.2

2.7

0.2

-

-

4.3

1.8

7.3

5.0

5.3

9.3

4.0

4.1

0.5

-0.6

0.2

6.1

-

-

-

-

7.0

7.4

3.0

8.6

2.9

2.3

-0.2

-

-

10.9

10.4

141

ACKNOWLEDGEMENTS 

This  report  was  prepared  in  the  Directorate-General  for  Economic  and  Financial  Affairs  under  the 
direction  of  Marco  Buti  –  Director-General,  Servaas  Deroose  –  Deputy  Director-General,  and  Elena 
Flores – Director "Policy strategy and co-ordination".  

Executive  responsibilities  were  attached  to  Massimo  Suardi  –  Head  of  Unit  for  "Economic  situation, 
forecasts, business and consumer surveys", Björn Döhring – Head of Sector "Macro-economic forecasts 
&  short-term  economic  developments",  and  the  forecast  coordinators  –  Laura  González  Cabanillas  and 
(cid:48)(cid:76)(cid:70)(cid:75)(cid:68)(cid:225)(cid:3)(cid:49)(cid:68)(cid:85)(cid:82)(cid:298)(cid:81)(cid:92)(cid:17)

The Overview  was prepared by Björn Döhring. Chapter 1 on "The EU economy: sailing through rough 
waters"  was  prepared  by  Michael  Sket  under  the  responsibility  of  Massimo  Suardi  and  Björn  Döhring. 
This  chapter  benefited  from  contributions  by  Paolo  Biraschi,  Chris  Bosma,  Suzanne  Casaux,  Oliver 
Dieckmann,  Marco  Fioramanti,  Laura  González  Cabanillas,  Peter  Grasmann,  (cid:48)(cid:76)(cid:70)(cid:75)(cid:68)(cid:225)(cid:3) (cid:49)(cid:68)(cid:85)(cid:82)(cid:298)(cid:81)(cid:92),  Daniela 
Porubská and Ismael Valdés Fernández . Boxes were contributed by Matteo Duiella, Christian Gayer, Jan 
in  't  Veld,  João  Nogueira  Martins,  Andreas  Reuter,  Werner  Röger,  Alessandro  Turrini  and  Alexandru 
Zeana. 

The sections on "Member States" were prepared under the supervision of Jürgen Kröger, Matthias Mors 
and  István  Pál  Székely,  Directors  for  the  "Economies  of  the  Member  States".  These  sections  benefited 
from  contributions  by  Lourdes  Acedo  Montoya,  Jean-Luc  Annaert,  Hanna  Aspegren,  Wojciech 
Balcerowicz, (cid:39)(cid:68)(cid:89)(cid:76)(cid:71)(cid:72)(cid:3)(cid:37)(cid:68)(cid:79)(cid:72)(cid:86)(cid:87)(cid:85)(cid:68)(cid:15)(cid:3)(cid:49)(cid:68)(cid:85)(cid:70)(cid:76)(cid:86)(cid:86)(cid:68)(cid:3)(cid:37)(cid:68)(cid:79)(cid:87)(cid:68)(cid:15)(cid:3)(cid:51)(cid:68)(cid:82)(cid:79)(cid:82)(cid:3)(cid:37)(cid:68)(cid:87)(cid:87)(cid:68)(cid:74)(cid:79)(cid:76)(cid:68)(cid:15)(cid:3)(cid:37)(cid:68)(cid:85)(cid:69)(cid:68)(cid:85)(cid:68)(cid:3)(cid:37)(cid:72)(cid:85)(cid:81)(cid:68)(cid:85)(cid:71)(cid:76)(cid:15)(cid:3)(cid:51)(cid:76)(cid:82)(cid:87)(cid:85)(cid:3)(cid:37)(cid:82)(cid:74)(cid:88)(cid:80)(cid:76)(cid:225)(cid:15)(cid:3)(cid:53)(cid:68)(cid:83)(cid:75)(cid:68)(cid:115)(cid:79)(cid:3)
Cancé,  Jakob  Christensen,  Pasquale  D'Apice,  Fotini  Dionyssopoulou,  Christophe  Doin,  Gatis  Eglitis, 
Raffaele  Fargnoli,  Leila  Fernandez  Stembridge,  Miroslav  Florián,  Olivia  Galgau,  Julien  Genet, 
Svetoslava  Georgieva,  Michael  Grams,  Oskar  Grevesmühl,  Valeska  Gronert,  Zoltán  Gyenes,  Peter 
Harvan,  Michiel  Humblet,  László  Jankovics,  Alexandra  Janovskaia,  Javier  Jareño  Morago,  Markita 
Kamerta,  Julda  Kielyte,  Csanád  Sándor  Kiss,  Mitja  Košmrl,  Bozhil  Kostov,  Mihály  Kovács,  Radoslav 
Krastev,  Stefan  Kuhnert,  Cvetan  Kyulanov,  Baudouin  Lamine,  Joanna  Leszczuk,  Milan  Lisický,  Erki 
Lohmuste,  Davide  Lombardo,  Kristin  Magnusson  Bernard,  Mart  Maivali,  Janis  Malzubris,  Anton 
Mangov,  Helena  Marrez,  Renata  Mata  Dona,  Dan  Matei,  Fabrizio  Melcarne,  Olivia  Mollen,  Alexander 
Molzahn,  Daniel  Monteiro,  Magdalena  Morgese  Borys,  Christos  Paschalides,  Presiyan  Petkov,  Nicolas 
Philiponnet,  Alexandra  Putinelu,  Vito  Ernesto  Reitano,  Alexia  Schmiliver, Martin  Schroeder,  Louise 
(cid:54)(cid:78)(cid:82)(cid:88)(cid:69)(cid:92)(cid:15)(cid:3) (cid:51)(cid:72)(cid:72)(cid:87)(cid:72)(cid:85)(cid:3) (cid:54)(cid:82)(cid:76)(cid:71)(cid:79)(cid:68)(cid:15)(cid:3) (cid:57)(cid:79)(cid:68)(cid:71)(cid:76)(cid:80)(cid:116)(cid:85)(cid:3) (cid:54)(cid:82)(cid:79)(cid:68)(cid:81)(cid:76)(cid:254)(cid:15)(cid:3) (cid:36)(cid:79)(cid:76)(cid:81)(cid:68)(cid:3) (cid:55)(cid:68)(cid:81)(cid:68)(cid:86)(cid:68)(cid:15)(cid:3) (cid:44)(cid:81)(cid:74)(cid:85)(cid:76)(cid:71)(cid:3) (cid:55)(cid:82)(cid:80)(cid:76)(cid:81)(cid:74)(cid:15)(cid:3) (cid:53)(cid:68)(cid:71)(cid:68)(cid:68)(cid:3) (cid:55)(cid:82)(cid:80)(cid:82)(cid:89)(cid:68)(cid:15)(cid:3) (cid:55)(cid:86)(cid:89)(cid:72)(cid:87)(cid:68)(cid:81)(cid:3)
Tsalinski,  Zinovia  Tsikalaki,  Christoph  Ungerer,  Thomas  Usher,  Henk  Van  Noten,  Samuel  Whittaker, 
(cid:53)(cid:68)(cid:73)(cid:68)(cid:225)(cid:3)(cid:58)(cid:76)(cid:72)(cid:79)(cid:261)(cid:71)(cid:72)(cid:78)(cid:15)(cid:3)Pavlína (cid:228)(cid:105)(cid:78)(cid:82)(cid:89)(cid:105) and Andreas Zenthöfer. Coordination and editorial support was provided 
by Martin Larch, Head of Unit "Coordination of country-specific policy surveillance" and Jost Angerer, 
Gerrit Bethuyne, Jörn Griesse, Bartosz Przywara and Barbara Stearns-Bläsing. 

The  sections  on  "Acceding  countries",  "Candidate  Countries"  and  "Other  non-EU  countries"  were 
prepared  under  the  supervision  of  Peter  Bekx,  Director  of  the  "International  economic  and  financial 
relations,  global  governance".  These  sections,  and  forecasts  for  all  other  non-EU  economies,  benefited 
from  contributions  by  Bernhard  Böhm,  Raul  de  Luzenberger  Hans  Feddersen,  Matteo  Fumerio,  Oscar 
Gomez  Lacalle,  Michael  Horgan,  Tim  Kaiser,  Plamen  Kaloyanchev,  Willem  Kooi,  Stefan  Kramer, 
Roberto Paulo Lieto, Roxanne Rua, Antonio Sanchez Pareja, Uwe Stamm, Dirk Verbeken, Rupert Willis 
and (cid:51)(cid:85)(cid:93)(cid:72)(cid:80)(cid:92)(cid:86)(cid:225)(cid:68)(cid:90)(cid:3)(cid:58)(cid:82)(cid:296)(cid:81)(cid:76)(cid:68)(cid:78)(cid:17)

Editorial  support  by  Chris  Maxwell  is  gratefully  acknowledged.  Support  on  the  communication  and 
publication of this report by Sabine Berger, Lisbeth Ekelöf, Robert Gangl, Dominique Marchalant, Jens 
Matthiessen,  Chris  Maxwell,  Irena  Novakova,  Sarka  Novotna,  Yasmina  Quertinmont,  Roman 

143 

Schönwiesner  and  Malin  Simu  is  gratefully  acknowledged.  IT  support  was  provided  by  Françoise 
Demarliere, Hubert Droulez, Rudy Druine and Frédéric Petre. 

Follow-up  calculations  were  performed  by  Cécile  Denis,  Karel  Havik,  Kieran  Mc  Morrow,  Fabrice 
(cid:50)(cid:85)(cid:79)(cid:68)(cid:81)(cid:71)(cid:76)(cid:15)(cid:3)(cid:53)(cid:68)(cid:73)(cid:68)(cid:225)(cid:3)(cid:53)(cid:68)(cid:70)(cid:76)(cid:69)(cid:82)(cid:85)(cid:86)(cid:78)(cid:76)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:58)(cid:72)(cid:85)(cid:81)(cid:72)(cid:85)(cid:3)(cid:53)(cid:124)(cid:74)(cid:72)(cid:85)(cid:17)(cid:3)(cid:41)(cid:82)(cid:85)(cid:72)(cid:70)(cid:68)(cid:86)(cid:87)(cid:3)(cid:68)(cid:86)(cid:86)(cid:88)(cid:80)(cid:83)(cid:87)(cid:76)(cid:82)(cid:81)(cid:86)(cid:3)(cid:90)(cid:72)(cid:85)(cid:72)(cid:3)(cid:83)(cid:85)(cid:72)(cid:83)(cid:68)(cid:85)(cid:72)(cid:71)(cid:3)(cid:69)(cid:92)(cid:3)(cid:38)(cid:75)(cid:85)(cid:76)(cid:86)(cid:3)(cid:37)(cid:82)(cid:86)(cid:80)(cid:68)(cid:15)(cid:3)(cid:51)(cid:68)(cid:82)(cid:79)(cid:82)(cid:3)
(cid:38)(cid:82)(cid:89)(cid:72)(cid:79)(cid:79)(cid:76)(cid:15)(cid:3) (cid:53)(cid:82)(cid:69)(cid:72)(cid:85)(cid:87)(cid:68)(cid:3) (cid:41)(cid:85)(cid:76)(cid:93)(cid:15)(cid:3) (cid:39)(cid:68)(cid:79)(cid:76)(cid:68)(cid:3) (cid:42)(cid:85)(cid:76)(cid:74)(cid:82)(cid:81)(cid:92)(cid:87)(cid:72)(cid:15)(cid:3) (cid:54)(cid:68)(cid:85)(cid:68)(cid:3) (cid:55)(cid:108)(cid:74)(cid:87)(cid:86)(cid:87)(cid:85)(cid:124)(cid:80)(cid:15)(cid:3) (cid:51)(cid:85)(cid:93)(cid:72)(cid:80)(cid:92)(cid:86)(cid:225)(cid:68)(cid:90)(cid:3) (cid:58)(cid:82)(cid:296)(cid:81)(cid:76)(cid:68)(cid:78)(cid:3) (cid:68)(cid:81)(cid:71)(cid:3) (cid:36)(cid:79)(cid:72)(cid:91)(cid:68)(cid:81)(cid:71)(cid:85)(cid:88)(cid:3) (cid:61)(cid:72)(cid:68)(cid:81)(cid:68)(cid:17)(cid:3)
Statistical  and  layout  assistance  was  provided  by  Andrea  Alati,  Antoine  Avdoulos,  Yves  Bouquiaux, 
Myrle  Claessens,  (cid:49)(cid:82)(cid:115)(cid:79)(cid:3) (cid:39)(cid:82)(cid:92)(cid:79)(cid:72)(cid:15)(cid:3) (cid:36)(cid:81)(cid:71)(cid:85)(cid:93)(cid:72)(cid:77)(cid:3) (cid:40)(cid:85)(cid:71)(cid:80)(cid:68)(cid:81)(cid:81)(cid:15)(cid:3) Laura  Fernández  Vilaseca,  Georgios  Gavanas,  Julien 
Genet,  Michel  Gerday,  Justyna  Gniadzik,  Jan  Kattevilder,  Johann  Korner,  Anders  Lindqvist,  Fabrizio 
Melcarne,  Christiaan  Muller,  Daniela  Porubská,  Emilio  Rodriguez  Castro,  Ulrike  Stierle  von  Schütz, 
(cid:45)(cid:68)(cid:70)(cid:72)(cid:78)(cid:3)(cid:54)(cid:93)(cid:72)(cid:79)(cid:82)(cid:298)(cid:92)(cid:276)(cid:86)(cid:78)(cid:76)(cid:15)(cid:3)(cid:58)(cid:76)(cid:81)(cid:71)(cid:92)(cid:3)(cid:57)(cid:68)(cid:81)(cid:71)(cid:72)(cid:89)(cid:92)(cid:89)(cid:72)(cid:85)(cid:72)(cid:3)(cid:68)(cid:81)(cid:71)(cid:3)(cid:38)(cid:75)(cid:85)(cid:76)(cid:86)(cid:87)(cid:82)(cid:86)(cid:3)(cid:61)(cid:68)(cid:89)(cid:82)(cid:86)(cid:17)(cid:3)

Valuable  comments  and  suggestions  by  Ronald  Albers,  Laura  Bardone,  Moreno  Bertoldi,  Gerrit 
Bethuyne,  Suzanne  Casaux,  Raul  de  Luzenberger,  Oliver  Dieckmann,  Patrick  D'Souza,  Marco 
Fioramanti,  Jakob  Wegener  Friis,  Carole  Garnier,  Gabriele  Giudice,  Laura  González  Cabanillas,  Peter 
Grasmann,  Heinz  Jansen,  Barbara  Kauffmann,  Joost  Kuhlmann,  Sven  Langedijk,  Martin  Larch,  Mary 
(cid:48)(cid:70)(cid:38)(cid:68)(cid:85)(cid:87)(cid:75)(cid:92)(cid:15)(cid:3) (cid:48)(cid:76)(cid:70)(cid:75)(cid:68)(cid:225)(cid:3) (cid:49)(cid:68)(cid:85)(cid:82)(cid:298)(cid:81)(cid:92)(cid:15)(cid:3) (cid:40)(cid:79)(cid:72)(cid:81)(cid:68)(cid:3) Reitano,  Michael  Sket,  Michael  Stierle,  Michael  Thiel,  Christian 
Weise, Peter Weiss, Norbert Wunner and Javier Yaniz Igal are gratefully acknowledged.  

Secretarial support for the finalisation of this report was provided by Anita Janicka and Els Varblane.  

Comments on the report would be gratefully received and should be sent to: 
Directorate-General for Economic and Financial Affairs 
Unit A4: Economic situation, forecasts, business and consumer surveys 
European Commission 
B-1049 Brussels 
E-mail: ecfin-forecasts@ec.europa.eu

144 

Statistical Annex 
European Economic Forecast – Autumn 2012 

Contents 

Output : GDP and its components 

Final domestic demand 
Final demand 

1.  Gross domestic product 
2.  Profiles (q-o-q) of quarterly GDP 
3.  Profiles (y-o-y) of quarterly GDP 
4.  GDP per capita 
5. 
6. 
7.  Private consumption expenditure 
8.  Government consumption expenditure 
9. 
10.  Investment in construction 
11.  Investment in equipment 
12.  Public investment 
13.  Potential GDP 
14.  Output gap relative to potential GDP 

Total investment 

Prices 

15.  Deflator of GDP 
16.  Deflator of private consumption 
17.  Consumer prices index 
18.  Consumer prices quarterly profiles 
19.  Deflator of exports of goods  
20.  Deflator of imports of goods  
21.  Terms of trade of goods 

Wages, population and labour market 

22.  Total population 
23.  Total employment 
24.  Unemployment rate 
25.  Compensation of employees per head 
26.  Real compensation of employees per head 
27.  Labour productivity 
28.  Unit labour costs, whole economy 
29.  Real unit labour costs 

Exchange rates 

30.  Nominal bilateral exchange rates  
31.  Nominal effective exchange rates  
32.  Relative unit labour costs 
33.  Real effective exchange rates 

146 

148 
148 
149 
149 
150 
150 
151 
151 
152 
152 
153 
153 
154 
154 

155 
155 
156 
156 
157 
157 
158 

158 
159 
159 
160 
160 
161 
161 
162 

162 
163 
163 
164 

 
 
 
 
General Government 

34.  Total expenditure 
35.  Total revenue 
36.  Net lending (+) or net borrowing (-) 
37.  Interest expenditure 
38.  Primary balance 
39.  Cyclically-adjusted net lending (+) or net borrowing (-) 
40.  Cyclically-adjusted primary balance 
41.  Structural budget balance 
42.  Gross debt 

Saving 

43.  Gross national saving 
44.  Gross saving of the private sector 
45.  Saving rate of households 
46.  Gross saving of general government 

Trade and international payments 

47.  Exports of goods and services 
48.  Imports of goods and services 
49.  Merchandise trade balance (% of GDP) 
50.  Current-account balance (% of GDP) 
51.  Net lending (+) or net borrowing (-) 
52.  Current-account balance (bn EUR) 
53.  Export markets (goods and services) 
54.  Export performance (goods and services) 

World economy 

55.  World GDP 
56.  World exports of goods and services 
57.  Export shares (goods) in EU trade 
58.  World imports of goods and services 
59.  Import shares (goods) in EU trade 
60.  World merchandise trade balances (bn USD) 
61.  World current-account balances (bn USD) 
62.  Primary commodity prices 

164 
165 
165 
166 
166 
167 
167 
168 
168 

169 
169 
170 
170 

171 
171 
172 
172 
173 
173 
174 
174 

175 
176 
176 
177 
177 
178 
178 
178 

Statistical Annex 

147 

 
 
 
 
European Economic Forecast, Autumn 2012

TABLE 1 : Gross domestic product, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
2.3
1.7
5.8
8.3
3.8
4.1
2.6
1.8
4.2
6.0
3.0
2.9
2.7
3.2
4.0
2.8
3.7
2.5
4.3
2.2
1.9
5.7
4.7
3.9
3.3
1.9
3.4
3.2
2.6
2.6
3.3
0.1

1993-97
1.9
1.1
:
7.8
1.7
2.1
1.4
1.4
4.1
3.4
5.1
3.0
2.1
2.2
4.2
6.1
3.3
1.7
-1.6
2.5
2.9
0.4
-2.3
1.4
5.9
2.1
2.0
3.1
2.0
:
3.6
1.4

2003-07
2.3
1.7
8.1
5.0
4.3
3.5
2.0
1.3
3.8
4.5
2.2
2.4
2.6
1.0
4.8
7.0
3.8
2.2
6.3
5.6
2.0
9.5
8.6
3.3
5.2
6.4
3.5
3.1
2.5
4.8
2.7
1.8

2008
1.0
1.1
-4.2
-2.1
-0.2
0.9
-0.1
-1.2
3.6
-0.7
4.0
1.8
1.4
0.0
3.4
5.8
0.3
0.4
6.2
3.1
-0.8
-3.3
2.9
0.9
5.1
7.3
-0.6
-1.0
0.3
2.1
-0.4
-1.0

2009
-2.8
-5.1
-14.1
-5.5
-3.1
-3.7
-3.1
-5.5
-1.9
-4.1
-2.4
-3.7
-3.8
-2.9
-7.8
-4.9
-8.5
-4.4
-5.5
-4.5
-5.8
-17.7
-14.8
-6.8
1.6
-6.6
-5.0
-4.0
-4.3
-6.9
-3.1
-5.5

2010
2.4
4.2
3.3
-0.8
-4.9
-0.3
1.7
1.8
1.3
2.9
3.4
1.6
2.1
1.4
1.2
4.4
3.3
2.0
0.4
2.5
1.3
-0.9
1.5
1.3
3.9
-1.6
6.6
1.8
2.1
-1.4
2.4
4.5

2011
1.8
3.0
8.3
1.4
-7.1
0.4
1.7
0.4
0.5
1.7
1.9
1.0
2.7
-1.7
0.6
3.2
2.7
1.4
1.7
1.9
0.8
5.5
5.9
1.6
4.3
2.5
3.9
0.9
1.5
0.0
1.8
-0.8

Autumn 2012
forecast
2013
0.7
0.8
3.1
1.1
-4.2
-1.4
0.4
-0.5
-1.7
0.7
1.6
0.3
0.9
-1.0
-1.6
2.0
0.8
0.1
1.4
0.8
1.6
3.6
3.1
0.3
1.8
2.2
1.9
0.9
0.4
0.0
2.3
0.8

2012
-0.2
0.8
2.5
0.4
-6.0
-1.4
0.2
-2.3
-2.3
0.4
1.0
-0.3
0.8
-3.0
-2.3
2.6
0.1
-0.4
0.8
-1.3
0.6
4.3
2.9
-1.2
2.4
0.8
1.1
-0.3
-0.3
-1.9
2.1
2.0

TABLE 2 : Profiles (qoq) of quarterly GDP, volume (percentage change from previous quarter, 2012-14)

2012/1
0.2
0.5
0.2
-0.7
:
-0.3
0.0
-0.8
:
0.1
-0.3
0.2
0.5
-0.1
0.0
0.7
0.9
0.0
0.0
-0.6
0.4
1.1
0.1
-1.0
0.6
0.1
0.7
-0.3
0.0
:
0.5
1.3

2012/2
-0.5
0.3
0.5
0.0
:
-0.4
0.0
-0.8
:
0.4
1.3
0.2
0.1
-1.2
-1.0
0.7
-1.1
-0.2
0.3
-0.2
-0.4
1.2
0.5
-0.2
0.4
0.5
0.7
-0.4
-0.2
:
0.3
0.2

2012/3
0.0
0.3
0.5
:
:
-0.4
0.2
-0.5
:
0.0
:
0.0
0.0
-0.9
-1.4
0.2
0.2
0.0
0.3
-0.7
1.0
0.8
0.9
0.0
0.2
-0.2
0.1
0.5
0.1
:
0.3
-0.4

2012/4
0.0
-0.1
0.6
:
:
-1.0
-0.2
-0.3
:
0.1
:
-0.1
0.1
-0.7
-0.6
0.1
0.2
-0.2
0.4
-0.3
0.7
0.7
0.7
0.1
0.2
0.4
0.0
0.1
-0.1
:
0.5
-0.3

2013/1
0.3
0.2
0.8
:
:
-0.3
0.1
-0.1
:
0.1
:
-0.1
0.2
0.0
-0.3
0.4
0.1
0.1
0.3
0.4
0.3
0.7
0.7
0.1
0.4
0.3
0.7
0.1
0.1
:
0.6
0.1

2013/2
0.2
0.3
1.0
:
:
-0.2
0.3
0.0
:
0.2
:
0.1
0.3
0.1
0.1
0.7
0.4
0.2
0.3
0.7
0.3
0.9
0.7
0.1
0.6
0.4
0.6
0.3
0.3
:
0.7
0.6

2013/3
0.3
0.4
1.0
:
:
0.0
0.2
0.2
:
0.2
:
0.3
0.4
0.2
0.1
0.8
0.1
0.3
0.4
0.7
0.3
0.9
0.8
0.1
0.6
0.7
0.7
0.4
0.3
:
0.8
0.5

2013/4
0.3
0.5
1.0
:
:
0.1
0.2
0.2
:
0.3
:
0.4
0.5
0.3
0.2
0.8
0.3
0.3
0.5
0.6
0.2
1.0
0.9
0.3
0.7
0.8
0.5
0.4
0.4
:
0.6
0.7

2014/1
0.6
0.5
1.0
:
:
0.2
0.4
0.2
:
0.4
:
0.4
0.5
0.1
0.2
0.7
0.3
0.4
0.5
0.4
0.3
1.0
0.9
0.4
0.6
0.4
0.6
0.6
0.4
:
0.6
0.9

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

148

19.10.2012

Spring 2012
forecast

2012
0.0
0.7
1.6
0.5
-4.7
-1.8
0.5
-1.4
-0.8
1.1
1.2
-0.9
0.8
-3.3
-1.4
1.8
0.8
-0.3
0.5
0.0
1.1
2.2
2.4
-0.3
2.7
1.4
0.3
0.5
0.0
-1.2
2.0
1.9

2014/3
0.5
0.5
1.0
:
:
0.3
0.4
0.3
:
0.6
:
0.4
0.6
0.2
0.3
0.8
0.4
0.4
0.6
0.4
0.4
1.1
0.9
0.4
0.7
1.0
0.7
0.5
0.5
:
0.7
0.1

2013
1.2
1.7
3.8
1.9
0.0
-0.3
1.3
0.4
0.3
2.1
1.9
0.7
1.7
0.3
0.7
2.9
1.6
1.0
1.9
1.5
1.4
3.6
3.5
1.0
2.6
2.9
2.1
1.7
1.3
0.8
2.1
1.7

2014/4
0.5
0.5
1.0
:
:
0.4
0.4
0.3
:
0.6
:
0.4
0.7
0.3
0.2
0.8
0.4
0.4
0.7
0.4
0.4
1.1
0.9
0.4
0.7
0.7
0.7
0.7
0.5
:
0.7
0.3

2014
1.6
2.0
4.0
2.2
0.6
0.8
1.2
0.8
-0.7
1.5
2.1
1.4
2.1
0.8
0.9
3.0
1.3
1.4
2.0
2.0
1.3
3.9
3.6
1.3
2.6
2.7
2.5
2.0
1.6
1.4
2.6
1.9

2014/2
0.5
0.5
1.0
:
:
0.3
0.4
0.2
:
0.5
:
0.4
0.6
0.2
0.3
0.6
0.3
0.4
0.5
0.4
0.4
1.0
0.9
0.4
0.6
0.6
0.6
0.5
0.4
:
0.7
-0.1

TABLE 3 : Profiles (yoy) of quarterly GDP, volume (percentage change from corresponding quarter in previous year, 2012-14) 

19.10.2012

Statistical Annex

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

2012/1
0.4
1.2
3.7
1.5
:
-0.6
0.4
-1.4
:
0.1
-1.0
-0.8
1.1
-2.3
-0.7
3.1
1.8
0.0
0.5
-0.5
0.3
5.5
4.0
-1.2
3.6
1.1
1.4
-0.1
0.1
:
2.4
2.8

2012/2
-0.3
1.0
2.7
-0.5
:
-1.3
0.3
-2.6
:
0.8
0.9
-0.5
0.8
-3.3
-2.2
3.0
0.1
-0.4
0.5
-1.0
-0.6
4.6
2.8
-1.1
2.5
1.6
1.3
-0.5
-0.3
:
2.1
3.3

2012/3
-0.4
1.0
2.0
:
:
-1.6
0.2
-2.8
:
0.6
:
-0.2
0.8
-3.5
-3.4
2.4
-0.7
-0.5
0.7
-1.7
0.7
3.9
2.6
-1.1
2.0
0.3
0.3
-0.6
-0.4
:
2.1
1.2

2012/4
-0.3
1.0
1.8
:
:
-2.1
-0.1
-2.4
:
0.6
:
0.3
0.7
-2.8
-3.0
1.7
0.3
-0.5
1.0
-1.8
1.7
3.9
2.3
-1.1
1.4
0.8
1.5
-0.1
-0.3
:
1.5
0.8

2013/1
-0.1
0.7
2.4
:
:
-2.1
0.1
-1.6
:
0.6
:
0.0
0.5
-2.8
-3.3
1.5
-0.5
-0.4
1.3
-0.8
1.6
3.5
3.0
0.1
1.2
1.0
1.5
0.4
-0.2
:
1.7
-0.3

2013/2
0.6
0.7
2.9
:
:
-1.9
0.4
-0.8
:
0.5
:
0.0
0.7
-1.5
-2.2
1.5
1.0
0.0
1.3
0.0
2.3
3.2
3.2
0.4
1.4
0.9
1.4
1.1
0.3
:
2.0
0.1

TABLE 4 : Gross domestic product per capita (percentage change on preceding year, 1993-2014)
5-year
averages
1998-02
2.0
1.6
6.5
6.7
3.4
3.2
2.0
1.7
2.9
4.7
2.3
2.2
2.4
2.6
3.9
2.8
3.4
2.1
5.4
2.4
1.5
6.8
5.3
4.2
3.3
2.6
3.2
2.9
2.4
3.0
2.2
-0.1

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

1993-97
1.7
0.8
:
7.1
0.9
1.9
1.0
1.4
2.2
2.0
4.2
2.4
1.7
2.0
4.3
5.8
2.9
1.4
-1.1
2.6
2.4
1.9
-1.7
1.6
5.7
2.3
1.6
2.9
1.8
:
2.3
1.2

2003-07
1.7
1.7
8.4
2.8
3.9
1.8
1.3
0.5
2.1
3.0
1.5
2.1
2.1
0.6
4.6
7.0
3.4
1.6
6.9
5.3
1.7
10.5
9.2
3.5
5.2
6.7
3.0
2.6
2.1
4.8
1.8
1.8

2008
0.2
1.3
-4.0
-3.8
-0.6
-0.7
-0.6
-1.9
0.9
-2.5
3.2
1.4
1.0
-0.1
3.2
5.6
-0.2
-0.2
6.7
2.0
-1.4
-2.2
3.4
1.1
5.1
7.5
-1.4
-1.6
-0.1
2.2
-1.3
-1.0

2010
1.5
4.3
3.4
-0.9
-5.2
-0.6
1.1
1.3
-1.2
1.0
2.9
1.1
1.8
1.4
0.9
4.1
2.9
1.7
1.1
2.2
0.9
1.1
3.1
1.5
3.8
-1.5
5.7
1.0
1.8
-1.1
1.5
4.9

2009
-3.5
-4.8
-14.0
-6.0
-3.5
-4.4
-3.7
-6.1
-4.5
-5.8
-2.7
-4.2
-4.1
-3.0
-8.7
-5.1
-9.0
-4.7
-5.0
-5.1
-6.3
-16.3
-14.4
-6.6
1.5
-6.4
-5.8
-4.6
-4.6
-6.8
-4.0
-5.4

2013/3
0.9
0.9
3.3
:
:
-1.4
0.5
-0.1
:
0.6
:
0.3
1.1
-0.4
-0.7
2.2
0.9
0.3
1.4
1.5
1.6
3.4
3.1
0.5
1.9
1.8
2.1
1.0
0.6
:
2.5
0.9

2011
0.9
3.0
8.3
1.1
-7.0
0.3
1.1
0.0
-2.1
-0.7
1.3
0.5
2.3
-1.8
0.4
3.0
2.3
1.1
3.3
2.1
0.4
7.5
14.8
1.9
3.8
2.7
3.2
0.1
1.3
0.3
1.1
-1.3

2013/4
1.1
1.4
3.8
:
:
-0.3
0.9
0.4
:
0.9
:
0.7
1.5
0.7
0.1
2.9
1.0
0.9
1.5
2.4
1.1
3.6
3.3
0.7
2.4
2.2
2.6
1.3
1.1
:
2.7
1.9

2014/1
1.4
1.8
4.0
:
:
0.2
1.1
0.7
:
1.1
:
1.2
1.8
0.8
0.7
3.1
1.1
1.2
1.7
2.4
1.1
3.9
3.4
0.9
2.6
2.3
2.5
1.8
1.4
:
2.7
2.8

Autumn 2012
forecast
2013
0.0
0.8
3.2
0.4
-4.3
-1.4
-0.1
-0.9
-2.6
-1.0
1.4
-0.2
0.5
-1.0
-1.7
1.6
0.4
-0.2
2.0
0.8
1.4
4.4
3.6
0.6
1.9
2.4
1.2
0.3
0.2
0.3
1.3
0.9

2012
-1.0
0.7
2.6
0.1
-6.1
-1.3
-0.3
-2.7
-3.3
-1.4
0.5
-0.8
0.4
-3.0
-2.4
2.3
-0.4
-0.7
1.3
-0.9
0.3
5.4
3.8
-0.9
2.4
1.0
0.4
-0.8
-0.5
-1.7
1.3
2.1

2014/2
1.7
2.0
4.0
:
:
0.7
1.2
0.9
:
1.4
:
1.4
2.0
0.9
0.9
3.0
1.1
1.4
1.9
2.2
1.2
3.9
3.6
1.2
2.6
2.5
2.5
2.0
1.6
:
2.7
2.0

2014
0.8
2.0
4.0
1.3
0.5
0.9
0.7
0.5
-1.5
-0.1
2.1
1.0
1.7
0.8
0.7
2.7
0.8
1.2
2.6
2.0
1.0
4.7
4.1
1.6
2.7
2.9
1.9
1.5
1.4
1.8
1.7
2.0

2014/3
1.9
2.1
4.0
:
:
1.0
1.3
1.0
:
1.7
:
1.5
2.2
0.8
1.1
3.0
1.3
1.5
2.1
1.8
1.3
4.1
3.7
1.5
2.6
2.8
2.5
2.1
1.7
:
2.6
1.7

2014/4
2.1
2.1
4.1
:
:
1.4
1.5
1.1
:
2.0
:
1.5
2.4
0.8
1.0
3.0
1.3
1.6
2.3
1.5
1.5
4.2
3.7
1.7
2.6
2.7
2.6
2.4
1.8
:
2.6
1.2

Spring 2012
forecast

2012
-0.8
0.6
1.7
0.2
-5.1
-1.7
-0.1
-1.9
-1.6
-0.7
0.7
-1.4
0.5
-3.3
-1.6
1.7
0.3
-0.6
1.5
-0.3
0.9
2.9
3.2
-0.2
2.8
1.6
-0.4
-0.2
-0.3
-1.2
1.2
2.0

2013
0.4
1.6
3.8
1.2
-0.4
-0.3
0.8
0.0
-0.5
0.4
1.5
0.2
1.3
0.2
0.5
2.8
1.3
0.8
3.0
1.2
1.1
4.3
4.0
1.1
2.6
3.1
1.4
1.1
1.0
0.8
1.3
1.8

149

European Economic Forecast, Autumn 2012

TABLE 5 : Domestic demand, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.6
1.0
6.7
7.0
4.4
5.0
2.9
2.3
4.2
5.2
1.0
2.9
1.4
3.6
3.7
2.3
2.9
2.4
8.9
2.0
1.6
6.8
4.6
4.7
2.8
3.2
2.8
4.2
2.8
2.1
3.9
0.0

1993-97
1.6
0.9
:
6.2
2.0
1.3
0.9
0.4
:
3.7
:
2.7
1.8
2.4
6.8
6.6
2.5
1.2
:
4.8
3.5
:
:
1.6
7.1
2.1
0.6
2.9
1.9
:
3.8
1.5

2003-07
2.3
1.0
10.4
5.8
4.5
4.6
2.5
1.3
5.2
3.4
3.7
1.9
2.1
1.0
5.2
5.2
3.7
2.2
9.3
4.2
3.1
12.4
10.9
2.4
5.5
11.0
3.1
3.1
2.6
5.3
2.8
1.1

2008
2.0
1.2
-9.4
-3.5
-0.2
-0.5
0.3
-1.2
8.0
0.5
3.4
2.0
0.7
0.9
3.2
5.7
0.7
0.3
6.5
2.2
-0.9
-9.1
3.2
0.7
5.6
7.3
0.0
-1.8
0.2
3.1
-1.5
-1.3

2009
-2.3
-2.5
-21.4
-11.2
-5.5
-6.3
-2.6
-4.4
-7.0
-8.0
-3.4
-2.8
-2.0
-3.3
-10.0
-7.4
-6.2
-3.8
-12.8
-5.1
-6.7
-27.4
-24.5
-10.5
-1.1
-12.0
-4.6
-5.0
-4.3
-10.1
-4.1
-4.0

TABLE 6 : Final demand, volume (percentage change on preceding year, 1993-2014)

5-year
averages
1998-02
3.0
2.5
7.2
10.4
4.6
5.3
3.5
2.4
4.3
7.4
2.4
4.2
3.3
3.9
4.8
5.3
4.5
3.4
6.7
4.6
3.2
6.1
5.3
7.4
3.9
5.1
3.7
4.2
3.6
3.0
3.7
0.2

1993-97
3.1
1.7
:
9.8
2.6
3.1
1.8
1.6
:
5.0
:
4.3
2.7
3.3
6.7
:
4.5
2.4
:
6.6
3.7
:
:
:
8.0
2.6
3.4
4.0
3.0
:
4.2
1.8

2003-07
3.1
3.1
10.3
5.4
4.9
4.6
2.5
2.0
4.8
7.0
4.6
3.5
3.9
1.9
7.2
8.8
4.7
3.2
9.6
7.0
3.5
11.8
10.3
6.8
7.1
10.8
4.5
3.5
3.6
5.5
3.2
2.1

2008
2.1
1.7
-5.4
-2.0
0.1
-0.6
0.1
-1.6
5.4
3.3
2.0
2.0
1.0
0.7
3.5
4.5
2.5
0.6
5.3
2.9
0.6
-6.3
5.9
2.9
6.0
7.5
0.6
-1.2
0.6
2.7
-0.7
-0.8

2009
-6.3
-6.0
-21.1
-7.2
-7.9
-7.0
-4.5
-7.3
-8.1
-10.1
-6.3
-5.0
-7.2
-5.0
-12.7
-11.4
-11.8
-6.3
-12.3
-6.6
-7.8
-23.7
-20.4
-10.4
-2.7
-10.8
-8.0
-5.7
-6.4
-11.8
-4.6
-7.0

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

150

Autumn 2012
forecast
2013
0.5
1.1
2.0
-0.9
-6.5
-3.8
0.1
-1.0
-4.4
1.1
1.4
-0.7
0.4
-2.5
-2.5
1.2
0.9
-0.5
2.8
0.3
2.8
4.2
3.1
-0.5
0.9
2.8
1.7
0.6
-0.1
0.2
2.1
0.6

2012
-0.3
0.1
4.7
-2.8
-8.7
-4.0
-0.3
-4.7
-6.0
3.1
-1.7
-1.4
0.5
-6.8
-5.5
-1.6
-1.2
-1.8
2.6
-3.4
0.9
4.6
2.3
-2.6
1.0
0.9
1.0
0.4
-1.3
-2.5
2.0
2.6

Autumn 2012
forecast
2013
1.1
2.2
3.4
1.5
-4.6
-1.8
0.5
-0.1
-2.8
1.0
2.9
0.9
1.7
-1.0
-0.1
2.7
0.8
0.7
3.0
1.9
3.2
4.4
4.1
2.0
1.9
3.1
2.2
1.4
1.0
0.6
2.6
0.6

2012
-0.5
1.4
4.5
0.4
-7.0
-2.6
0.3
-3.4
-4.5
-2.1
2.1
1.1
0.9
-4.0
-2.7
2.9
-1.6
-0.5
2.3
-0.3
1.5
4.7
3.4
-0.3
1.6
0.7
0.8
0.4
-0.2
-2.1
2.3
2.6

2014
1.3
2.1
3.9
0.4
-0.8
-0.3
1.2
1.1
-1.5
1.8
1.9
0.8
1.8
0.2
0.4
2.0
1.4
1.2
3.1
1.3
1.5
4.5
4.3
0.6
2.1
3.2
2.4
1.5
1.4
1.8
3.0
1.5

2014
2.5
3.7
5.3
2.7
0.4
1.2
1.9
1.8
-0.6
2.7
3.6
2.8
3.3
1.5
2.7
4.3
1.4
2.5
3.6
3.5
2.4
5.3
5.5
3.6
3.4
3.9
3.5
2.5
2.6
2.2
3.4
1.8

19.10.2012

Spring 2012
forecast

2012
0.2
1.0
2.5
-2.5
-6.4
-4.4
0.2
-2.9
-2.4
2.6
0.7
-1.9
0.4
-6.6
-2.8
1.4
0.9
-1.1
0.0
-1.0
1.9
2.8
2.6
-2.0
1.9
1.9
0.6
-0.1
-0.7
-1.5
2.2
2.1

2013
1.1
2.0
4.0
-0.3
-1.6
-2.1
1.3
-0.1
0.3
2.3
1.3
0.0
1.4
-0.8
-0.2
2.3
1.3
0.7
2.2
0.9
1.5
4.6
3.8
-0.3
2.2
3.8
1.8
0.8
0.8
1.6
2.0
1.4

Spring 2012
forecast

2012
0.5
1.6
2.0
0.8
-4.7
-2.7
0.7
-2.0
-1.3
0.9
1.6
-0.8
1.3
-4.3
-0.7
2.2
1.2
-0.1
1.4
1.0
2.4
3.4
3.3
1.7
2.4
2.2
0.9
0.6
0.2
-1.5
2.5
2.1

2013
2.6
3.1
4.8
2.3
-0.2
-0.5
2.0
0.9
0.9
3.6
3.0
1.8
2.8
0.7
2.1
4.1
2.3
1.9
3.4
3.1
2.7
5.2
4.7
4.0
3.3
4.3
3.0
1.8
2.1
1.9
2.5
1.9

2010
1.7
2.6
1.1
-4.4
-7.0
-0.6
1.6
2.1
1.9
9.2
-0.8
0.2
1.8
0.8
-0.2
3.6
2.9
1.3
-4.8
2.1
1.3
-0.5
2.1
-0.5
4.6
-1.5
6.5
2.3
1.6
-3.8
2.8
2.8

2010
5.1
6.2
10.0
1.3
-5.2
1.6
3.2
3.9
2.4
8.1
8.5
5.0
4.2
2.4
3.6
8.7
4.4
4.1
1.1
7.2
2.0
3.2
7.4
6.1
6.7
2.0
8.1
3.2
4.1
-1.5
3.7
5.3

2011
1.8
2.6
9.8
-3.7
-8.7
-1.9
1.7
-1.0
-2.8
6.1
-0.7
0.5
2.6
-5.6
-0.7
1.2
4.5
0.5
-0.6
-0.1
-0.4
11.3
5.8
0.1
3.4
3.1
3.3
-0.4
0.6
-0.4
1.7
0.1

2011
3.5
4.4
16.0
1.2
-7.2
0.1
2.4
0.5
-1.0
5.7
1.0
2.1
4.3
-2.6
2.4
6.3
4.0
2.3
4.2
3.8
2.2
11.8
9.1
3.1
4.7
4.8
4.6
0.7
2.3
0.3
2.2
0.1

TABLE 7 : Private consumption expenditure, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.8
1.3
6.1
7.2
3.5
4.3
3.0
1.9
4.2
4.7
3.2
3.4
1.9
3.4
3.0
4.0
3.0
2.4
5.9
1.6
0.7
5.5
5.4
5.5
3.9
3.6
3.2
4.4
2.8
2.2
4.2
0.7

1993-97
1.5
1.2
:
5.1
1.9
1.3
1.0
0.8
:
3.0
:
2.6
1.2
2.0
6.5
:
2.1
1.3
-3.8
3.8
2.5
:
:
:
5.8
3.9
0.8
3.1
2.1
:
3.5
1.6

2003-07
1.4
0.4
9.8
5.4
3.9
3.7
2.1
1.1
5.4
1.1
2.6
0.6
1.7
1.7
3.5
5.1
3.8
1.6
7.8
4.0
3.2
12.6
11.1
3.0
3.7
11.7
2.9
2.7
2.1
4.3
2.9
1.0

2008
2.0
0.8
-5.2
-0.4
4.3
-0.6
0.2
-0.8
7.8
-0.8
5.6
1.3
0.7
1.4
2.3
6.1
1.9
0.4
3.4
2.8
-0.3
-5.8
3.7
-0.7
5.7
9.0
0.0
-1.6
0.3
1.4
-0.6
-0.9

2009
0.6
0.1
-14.8
-5.7
-1.6
-3.8
0.3
-1.6
-7.5
-1.7
-1.1
-2.1
1.1
-2.2
0.1
0.2
-2.9
-1.0
-7.6
0.2
-4.2
-22.6
-17.8
-6.6
2.0
-10.1
-0.3
-3.1
-1.5
-7.5
-1.9
-0.7

2010
2.7
0.9
-2.4
0.5
-6.2
0.7
1.5
1.2
1.5
2.2
-1.7
0.3
1.7
2.1
1.3
-0.7
3.3
0.9
0.1
1.0
1.9
2.4
-4.7
-3.0
3.1
-0.4
4.0
1.3
1.1
-0.9
1.8
2.6

2011
0.2
1.7
3.5
-2.3
-7.7
-1.0
0.3
0.1
0.2
2.4
4.0
-1.0
0.7
-3.8
0.9
-0.5
2.5
0.1
-0.6
0.7
-0.8
4.5
6.4
0.5
2.5
1.3
2.1
-0.9
0.1
0.2
2.5
0.1

TABLE 8 : Government consumption expenditure, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
2.4
1.2
1.2
7.2
5.2
4.3
1.2
2.1
4.7
5.0
0.9
3.0
1.3
4.1
3.7
2.2
1.5
2.0
8.1
2.6
2.5
2.8
0.9
2.1
2.1
-0.4
1.4
3.1
2.1
1.0
3.1
3.2

1993-97
1.1
1.6
:
3.3
2.2
1.9
1.4
-1.1
:
4.1
:
1.7
2.9
2.2
3.2
0.4
1.0
1.2
-13.1
1.7
2.6
:
:
-1.7
2.7
1.7
-0.3
0.4
0.6
:
0.2
3.0

2003-07
1.3
0.5
4.4
4.3
2.8
5.3
1.6
1.6
2.3
3.3
1.9
3.2
1.7
1.2
2.8
2.7
1.4
1.8
3.2
0.8
1.6
3.2
2.8
1.0
4.6
-0.1
0.6
2.3
1.9
3.5
1.5
1.1

2008
2.7
3.2
4.6
1.3
-2.6
5.9
1.3
0.6
6.1
1.5
12.2
2.8
4.1
0.5
5.9
6.1
1.9
2.3
-1.0
1.2
1.9
1.6
0.4
1.1
7.4
7.2
1.0
1.6
2.3
-0.2
2.6
-0.1

2009
1.9
3.0
-1.9
-3.7
4.9
3.7
2.5
0.8
6.8
4.5
-1.5
5.0
0.6
4.7
2.5
6.1
1.1
2.6
-6.5
4.0
2.5
-9.4
-1.4
0.7
2.1
3.1
2.2
0.8
2.2
0.4
4.4
2.3

2010
0.7
1.7
-0.8
-4.6
-8.7
1.5
1.8
-0.6
1.0
3.0
0.9
0.7
0.2
0.9
1.5
1.0
-0.3
0.7
1.9
0.5
0.3
-7.9
-3.4
-0.7
4.1
-4.4
2.1
0.4
0.7
-1.6
0.9
2.2

2011
0.8
1.0
1.4
-4.3
-5.2
-0.5
0.2
-0.8
-0.2
1.5
3.2
0.1
0.1
-3.7
-1.2
-4.3
0.4
-0.1
0.5
-2.5
-1.3
1.1
0.5
-0.3
-1.7
-3.5
1.7
0.2
-0.1
-0.3
-2.6
2.0

Autumn 2012
forecast
2013
0.4
1.0
3.3
-0.5
-6.9
-2.1
-0.1
-0.9
-3.6
0.5
0.8
-0.8
0.5
-1.7
-2.0
0.7
0.4
-0.4
3.1
0.4
2.2
3.9
3.3
-0.8
1.5
1.9
1.6
0.9
0.0
-1.2
2.0
0.4

2012
-0.6
1.0
3.2
-2.1
-7.7
-1.9
0.0
-3.4
-3.4
1.8
-0.8
-1.2
0.2
-5.9
-3.0
-0.1
1.1
-1.0
3.0
-3.3
0.9
4.7
4.2
-0.8
1.6
0.8
1.5
0.5
-0.6
-1.7
1.9
2.3

Autumn 2012
forecast
2013
0.9
1.3
1.0
-1.7
-7.2
-7.2
1.1
-0.3
-2.4
1.2
1.2
-0.5
0.8
-3.2
-2.1
0.1
0.5
-0.4
1.1
-0.5
1.4
1.5
0.5
0.1
1.7
2.1
0.9
-2.0
-0.4
-0.5
-0.4
0.1

2012
0.4
1.2
3.2
-4.0
-6.2
-4.9
1.3
-0.7
-1.7
3.5
2.2
-0.1
1.3
-3.5
-2.8
-0.6
-0.2
-0.2
0.3
-1.3
0.2
1.1
-1.5
-2.8
-0.2
-2.3
0.9
1.6
0.0
-2.0
-1.6
1.6

2014
1.3
1.6
3.5
1.2
-1.6
0.0
1.1
0.9
-0.9
1.6
1.4
0.4
1.1
0.2
0.6
1.3
1.5
1.0
3.5
1.4
1.6
3.9
4.1
0.4
2.1
2.4
2.5
1.7
1.2
0.7
2.2
1.1

2014
1.4
1.6
0.2
-3.0
-3.1
-1.4
1.3
-0.4
-1.5
1.4
1.0
0.5
1.3
-1.5
-0.4
1.6
0.8
0.6
0.5
0.2
0.8
2.0
2.3
1.0
3.1
1.9
0.9
-1.3
0.4
-0.5
0.0
0.5

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
0.1
0.9
2.8
-1.7
-5.7
-2.2
0.7
-2.3
-2.5
0.7
0.3
-1.5
0.8
-6.1
-1.5
0.2
1.7
-0.6
0.6
-0.4
1.4
2.2
3.0
-1.5
2.0
1.3
1.1
0.3
-0.3
-0.6
2.0
1.4

2013
1.2
1.2
3.0
0.3
-1.1
-1.3
1.5
-0.4
0.3
2.0
1.0
0.0
1.0
-1.0
-0.4
1.6
1.0
0.5
1.9
0.5
1.6
3.3
3.4
0.0
2.6
2.6
1.8
1.0
0.7
0.4
1.8
0.8

Spring 2012
forecast

2012
0.4
1.2
1.0
-3.8
-11.0
-6.9
0.5
-0.8
-3.0
2.6
1.8
-0.8
0.7
-2.9
-3.7
1.3
1.0
-0.8
0.8
-2.0
1.3
0.0
-1.6
-3.1
0.0
0.8
1.0
0.3
-0.5
-0.5
-2.0
0.8

2013
0.4
1.4
1.7
-2.7
-9.5
-3.5
0.5
-0.4
0.3
2.4
0.0
0.1
1.2
-2.6
-0.9
1.3
0.9
0.0
1.6
0.2
0.3
0.3
1.0
-0.8
1.2
2.5
0.8
-1.1
-0.1
-0.4
-1.5
0.4

151

European Economic Forecast, Autumn 2012

TABLE 9 : Total investment, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.5
0.3
11.0
6.9
8.8
7.3
4.5
4.1
4.0
7.1
-3.4
2.2
0.9
3.7
5.4
-1.2
3.9
3.1
20.1
2.3
2.8
15.8
5.5
7.0
1.1
3.6
4.4
5.0
3.4
2.9
4.2
-2.8

1993-97
1.7
0.0
:
10.6
2.3
1.5
-0.3
-0.2
:
6.6
:
4.6
1.8
2.8
12.7
10.4
3.6
0.9
:
7.1
6.4
:
:
4.2
13.8
8.2
1.1
3.9
2.9
:
7.7
0.2

2003-07
4.6
2.4
13.9
7.5
8.2
5.9
4.0
1.4
8.2
6.6
8.5
2.7
2.0
-1.3
7.8
7.4
4.8
3.4
16.3
5.6
4.5
16.6
16.2
2.8
8.9
16.8
6.7
4.6
4.0
10.4
3.1
0.6

2008
2.0
1.3
-13.3
-10.0
-14.3
-4.7
0.3
-3.7
6.0
2.0
-19.7
4.5
0.7
-0.3
7.1
1.0
-0.6
-1.4
21.9
4.1
-4.2
-13.8
-5.2
2.9
9.6
15.6
1.4
-4.6
-1.2
8.2
-5.8
-4.1

2009
-8.4
-11.6
-38.3
-27.7
-13.7
-18.0
-10.6
-11.7
-9.7
-15.5
-16.5
-12.0
-7.8
-8.6
-23.2
-19.7
-13.2
-12.7
-17.6
-11.0
-13.4
-37.4
-39.5
-11.1
-1.2
-28.1
-15.5
-13.7
-13.0
-11.8
-16.1
-10.6

2010
-1.4
5.9
-7.4
-22.7
-15.0
-6.2
1.2
2.1
-4.9
6.8
13.0
-7.2
0.8
-4.1
-13.8
6.5
1.9
-0.1
-18.3
1.0
-3.8
-18.1
1.9
-9.5
-0.4
-2.1
7.2
3.5
0.2
-11.3
-0.5
0.1

TABLE 10 : Investment in construction, volume (percentage change on preceding year, 1993-2014)
5-year
averages
1998-02
-1.4
-2.6
8.7
7.0
4.8
7.3
3.3
3.5
1.8
9.3
:
2.2
-1.0
3.2
2.9
-1.7
4.6
1.9
:
-2.0
0.3
:
2.8
5.0
1.0
2.8
4.3
3.9
2.3
:
2.2
:

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

2003-07
4.3
-1.0
14.3
7.1
6.8
5.5
4.0
1.5
10.1
4.7
1.5
1.6
1.3
-3.6
5.6
9.1
5.0
2.1
18.2
4.4
4.5
:
15.9
0.2
7.1
16.5
5.0
7.1
5.2
:
0.5
:

1993-97
1.6
0.6
:
10.5
0.0
0.4
-2.5
-1.8
:
4.1
:
1.3
1.4
2.8
5.8
:
1.1
-0.1
:
-7.1
4.5
:
:
:
:
8.9
-7.0
2.0
:
:
4.0
:

2010
-0.6
3.2
-9.9
-30.1
-19.2
-9.8
-5.9
-4.8
-4.7
-2.0
0.0
-10.3
-2.7
-4.2
-18.7
-7.7
8.1
-4.0
-15.5
-1.5
-10.1
:
-7.4
-13.5
2.2
-18.8
4.4
2.4
-5.1
:
-8.0
:

2009
-7.6
-3.2
-30.5
-31.6
-12.8
-16.6
-6.3
-8.8
-14.1
-4.5
-15.5
-9.8
-7.1
-6.7
-20.8
-10.3
-15.0
-8.1
1.0
-4.1
-14.7
:
-37.1
-5.9
4.9
-28.7
-11.7
-12.8
-11.4
:
-17.4
:

2008
1.6
-0.7
-10.4
-9.2
-21.2
-5.8
-1.7
-2.8
3.1
2.9
-21.9
2.6
0.9
-4.5
11.3
3.9
-1.4
-2.1
46.1
-1.9
-8.1
:
0.3
2.2
8.2
20.3
-2.6
-4.9
1.0
:
-8.8
:

Autumn 2012
forecast
2013
0.5
1.9
0.0
-1.5
-3.3
-5.6
0.1
-2.1
-12.0
2.0
4.5
-1.0
0.9
-4.6
-3.8
2.5
-0.1
-0.6
3.4
0.1
6.2
6.7
4.8
-0.4
-2.8
5.1
2.9
2.9
0.1
5.3
5.8
1.6

2012
-0.1
-1.2
20.2
-4.0
-14.4
-9.0
0.3
-8.1
-22.0
5.2
-0.5
-3.0
1.6
-14.1
-8.9
-6.2
-0.8
-3.5
0.2
-1.7
1.6
9.2
3.1
-5.4
1.7
6.7
4.0
1.9
-2.2
-5.7
5.7
3.2

Autumn 2012
forecast
2013
0.7
2.0
-7.7
-8.2
-2.9
-7.3
0.1
-3.7
-12.4
2.2
:
-2.7
0.5
-7.7
-8.4
2.7
0.3
-1.3
:
-2.6
3.8
:
5.5
0.2
-6.1
4.8
1.2
2.6
0.0
:
4.9
:

2012
-0.8
-0.2
29.0
-9.8
-14.8
-11.3
1.0
-6.5
-20.3
1.4
:
-8.0
1.3
-17.1
-14.2
-2.4
-0.6
-3.5
:
-6.3
-1.5
:
3.0
-5.8
-0.6
6.8
2.6
7.4
-0.5
:
6.6
:

2014
1.6
4.1
7.8
3.0
5.7
-0.3
1.7
2.6
-5.3
2.5
5.5
2.6
2.9
2.1
0.6
4.2
1.8
2.5
4.1
2.1
2.5
7.6
7.7
0.9
1.4
5.5
4.4
4.6
2.8
7.0
9.4
1.9

2014
0.9
1.9
2.4
-0.1
5.4
-0.9
0.7
-0.5
-6.0
3.0
:
2.0
1.3
1.1
-1.1
4.9
1.4
0.9
:
0.5
2.5
:
8.1
-0.4
-2.3
5.0
3.7
3.8
1.8
:
6.6
:

19.10.2012

Spring 2012
forecast

2012
0.7
2.1
8.3
-4.0
-6.6
-7.9
0.5
-3.8
-1.1
6.2
0.0
-3.9
1.4
-11.8
-4.6
3.2
-1.2
-1.5
-2.2
0.0
4.6
6.0
4.8
-2.3
4.7
4.7
1.1
-0.6
-0.9
-5.0
6.4
4.3

2013
1.6
4.7
8.2
1.0
6.7
-3.2
1.8
1.3
0.8
3.9
4.5
0.2
2.3
0.7
1.2
4.8
2.8
1.9
3.6
2.1
3.2
10.4
8.2
-0.7
1.6
6.4
3.3
3.2
2.2
6.5
6.3
1.7

Spring 2012
forecast

2012
-0.3
1.4
12.6
-9.2
-7.4
-9.1
0.6
-1.3
-3.1
4.1
:
-4.9
0.6
-12.0
-11.2
3.2
-1.3
-1.7
:
-3.0
4.9
:
5.5
0.1
2.3
4.7
0.7
-1.4
-0.4
:
4.1
:

2013
1.3
2.7
2.6
-3.7
6.1
-3.5
0.6
-0.5
-0.5
4.4
:
-0.6
1.5
0.8
-1.7
4.8
2.9
0.6
:
0.7
2.4
:
8.9
0.6
-4.3
5.6
1.3
2.6
1.4
:
3.5
:

2011
4.1
6.2
25.7
-12.2
-19.6
-5.3
3.5
-1.8
-13.1
10.2
-14.6
5.7
7.3
-12.1
-8.1
14.2
6.8
1.5
-9.7
-0.7
0.2
27.9
18.3
-3.6
9.0
6.3
6.7
-2.4
1.4
-7.2
4.0
0.8

2011
0.1
5.8
-6.2
-15.8
-21.0
-9.0
3.5
-2.6
-7.7
1.0
-1.3
4.0
4.4
-12.3
-20.1
2.7
3.4
-0.1
:
-3.5
1.7
:
13.9
-12.4
9.5
4.9
9.2
-3.1
1.0
:
-2.4
:

152

TABLE 11 : Investment in equipment, volume (percentage change on preceding year, 1993-2014)
5-year
averages
1998-02
3.9
3.8
13.5
7.3
15.5
5.9
6.2
4.7
9.2
3.1
:
2.1
1.4
4.0
8.5
0.5
1.6
4.8
:
6.5
4.1
:
8.8
8.1
0.9
4.2
4.3
6.2
4.9
:
4.9
:

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

2003-07
4.3
6.4
13.3
9.9
10.8
7.0
3.7
1.7
4.2
10.0
23.7
4.8
3.1
3.0
10.9
4.3
3.9
4.9
15.0
7.0
4.7
:
17.9
6.3
11.1
19.1
8.6
0.5
6.7
:
5.8
:

1993-97
1.6
-1.5
:
12.1
7.1
3.0
2.3
1.1
:
9.6
:
7.7
1.7
3.5
17.9
:
7.3
2.0
:
5.3
6.6
:
:
:
:
9.5
9.3
6.1
:
:
11.0
:

2010
-3.9
10.3
2.2
-10.6
-8.2
3.0
4.1
12.0
-5.9
28.5
35.2
-4.6
6.0
-4.3
-7.9
11.1
-11.8
5.3
-18.5
6.0
2.2
:
20.6
-3.5
-3.3
-32.7
11.9
7.3
0.0
:
9.9
:

2009
-11.1
-22.5
-55.0
-18.8
-18.4
-24.5
-9.6
-16.8
-0.3
-34.4
-21.1
-16.4
-10.6
-13.2
-28.9
-26.6
-11.7
-17.3
-45.0
-18.8
-14.6
:
-50.0
-17.3
-10.8
-27.7
-22.7
-21.0
-19.2
:
-19.6
:

2008
2.0
2.9
-20.4
-12.2
-4.8
-3.2
3.5
-5.2
13.6
10.3
-23.8
7.0
-0.4
6.9
3.1
1.2
1.5
0.7
3.1
10.5
-2.7
:
-17.3
1.6
13.0
10.9
5.5
-5.0
2.0
:
-5.4
:

TABLE 12 : Public investment (as a percentage of GDP, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.8
1.9
4.4
3.5
3.4
3.3
2.9
2.2
2.9
4.4
4.1
3.2
1.6
4.3
3.2
3.2
2.6
2.5
3.5
3.4
1.7
1.3
2.5
3.6
3.3
2.6
3.0
1.4
2.4
:
2.5
5.2

1993-97
1.7
2.2
:
2.3
2.9
3.6
3.1
2.2
:
4.0
:
2.7
2.9
4.2
:
:
2.8
2.7
:
:
1.8
:
:
:
:
:
2.8
1.6
:
:
2.4
6.1

2003-07
1.6
1.5
4.4
3.8
3.3
3.7
3.2
2.4
3.3
4.0
4.2
3.3
1.2
3.4
3.6
2.2
2.6
2.5
3.8
4.8
1.8
3.8
3.9
3.8
3.6
4.3
3.0
1.6
2.4
:
2.4
3.6

2008
1.6
1.6
5.4
5.3
3.7
4.0
3.2
2.2
3.1
3.4
2.4
3.5
1.1
2.9
4.4
2.0
2.5
2.6
5.6
4.6
1.9
4.9
4.9
2.9
4.6
6.6
3.3
2.3
2.7
2.1
2.6
3.0

2009
1.7
1.7
5.1
3.8
3.1
4.5
3.4
2.5
4.2
3.9
2.3
3.8
1.2
3.0
4.6
2.3
2.8
2.8
4.9
5.1
2.0
4.3
3.9
3.1
5.2
5.9
3.5
2.7
2.9
1.9
2.6
3.4

2010
1.6
1.7
3.9
3.5
2.3
4.0
3.1
2.1
3.8
4.1
2.1
3.6
1.1
3.6
4.4
2.6
2.5
2.6
4.6
4.3
2.1
3.7
4.6
3.4
5.6
5.7
3.5
2.5
2.7
1.4
2.5
3.3

Autumn 2012
forecast
2013
0.4
1.6
9.0
4.8
-3.0
-3.5
0.1
-0.6
-11.0
2.0
:
0.9
1.2
0.0
0.2
2.0
-1.8
0.2
:
2.6
11.0
:
4.0
-1.3
2.5
5.5
4.0
3.1
1.6
:
6.4
:

2012
0.6
-3.0
11.4
2.8
-14.0
-6.6
-2.2
-10.9
-26.0
13.0
:
3.5
1.5
-10.3
-3.8
-11.0
-4.0
-4.5
:
2.4
6.0
:
3.5
-2.0
5.5
6.7
4.8
-8.2
-2.3
:
5.0
:

Autumn 2012
forecast
2013
1.7
1.5
4.5
1.6
2.0
1.5
3.1
1.6
2.6
3.8
2.6
3.3
1.0
1.7
3.8
1.7
2.5
2.0
4.0
3.4
2.1
4.0
4.8
4.5
4.3
5.0
3.5
1.5
2.2
1.0
1.9
3.6

2012
1.9
1.5
5.5
2.0
1.9
1.8
3.1
1.8
2.8
4.1
2.6
3.3
1.0
2.0
3.1
2.4
2.5
2.1
3.8
3.5
2.3
4.1
4.7
3.9
5.2
5.0
3.5
1.9
2.3
1.0
2.0
3.4

2014
2.0
7.2
13.2
5.0
6.0
0.8
4.2
6.3
-3.7
2.0
:
3.4
5.2
3.7
2.0
3.6
2.5
5.0
:
3.5
3.0
:
8.0
0.2
6.8
6.1
5.0
6.5
5.2
:
11.4
:

2014
1.7
1.5
3.7
1.5
1.8
1.5
3.0
1.6
2.6
3.9
2.7
3.2
1.0
1.5
4.4
1.7
2.5
2.0
4.2
3.4
1.9
3.8
5.0
4.3
3.5
5.1
3.5
1.3
2.1
1.0
1.8
3.6

2011
9.3
7.0
102.7
-10.5
-18.1
2.4
3.5
-1.1
-23.1
24.6
-39.3
9.2
12.1
-14.1
9.5
46.7
19.2
4.0
:
0.0
-2.0
:
32.6
8.5
9.7
7.0
3.9
-0.3
4.2
:
11.0
:

2011
1.7
1.6
4.2
2.5
1.6
2.9
3.1
2.0
3.5
3.8
2.5
3.4
1.0
2.6
3.6
2.3
2.5
2.3
3.4
3.6
2.2
4.2
4.4
3.0
5.7
5.2
3.4
2.2
2.5
1.4
2.3
3.3

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
1.7
2.7
4.0
2.4
-5.2
-6.1
0.5
-6.9
4.0
12.0
:
-2.7
2.3
-14.0
1.2
3.6
-1.1
-1.4
:
2.9
6.0
:
4.0
1.0
9.0
4.7
1.5
0.0
0.2
:
8.0
:

2013
2.0
7.2
15.0
5.7
6.7
-3.0
4.9
3.5
4.0
4.0
:
1.0
3.4
0.5
3.5
5.5
2.5
3.9
:
3.5
4.6
:
8.0
-2.0
11.5
7.5
5.0
5.0
4.7
:
8.2
:

Spring 2012
forecast

2012
1.8
1.5
5.5
2.7
2.5
1.9
3.1
1.8
3.1
3.9
2.6
3.5
1.0
2.0
3.2
2.1
2.5
2.2
3.3
3.7
2.4
4.2
4.3
4.4
5.6
5.5
3.5
2.2
2.4
1.5
2.2
3.6

2013
1.6
1.5
4.7
2.3
2.6
1.8
3.2
1.5
3.1
3.9
2.6
3.4
1.0
1.8
3.2
2.1
2.5
2.1
3.6
3.7
1.9
3.8
4.6
4.6
4.9
5.2
3.5
2.1
2.3
1.5
2.1
3.6

153

European Economic Forecast, Autumn 2012

TABLE 13 : Potential GDP, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
2.3
1.5
4.7
8.4
4.1
3.5
1.9
1.6
3.4
5.0
2.7
3.0
2.5
3.0
:
:
3.9
:
2.7
:
2.1
6.4
:
:
4.3
:
2.9
3.2
:
:
3.2
:

1993-97
2.1
1.9
:
7.2
2.2
2.3
1.8
1.4
:
3.9
:
3.2
2.4
2.5
:
:
2.0
:
:
:
2.1
:
:
:
:
:
2.0
2.4
:
:
3.5
:

2003-07
1.8
1.2
6.3
4.7
3.4
3.4
1.8
1.0
3.6
4.1
2.7
1.8
2.2
1.2
3.6
5.6
2.7
1.8
5.9
3.7
1.3
6.4
5.5
2.9
4.0
4.3
2.7
2.5
2.1
3.5
2.2
:

2008
1.6
1.2
2.6
1.1
1.5
2.5
1.5
0.3
2.1
2.5
2.3
1.9
1.7
1.0
3.5
5.3
1.8
1.4
5.2
3.8
1.2
2.7
5.5
1.3
5.0
5.0
2.3
1.6
1.6
3.4
1.4
:

2009
1.1
0.7
-0.9
-1.1
0.0
0.9
1.0
-0.3
1.5
1.2
1.2
1.2
1.0
0.0
1.6
3.2
0.6
0.6
2.9
2.3
0.5
-0.9
2.8
0.3
3.9
2.3
1.5
0.8
0.8
2.7
0.8
:

2010
1.2
1.2
-0.5
-0.5
-1.1
0.3
1.1
0.0
1.5
0.9
1.4
0.9
0.9
-0.1
0.3
2.4
0.7
0.7
0.6
1.7
0.4
-1.5
-0.5
0.0
4.2
1.7
2.0
0.8
0.8
2.2
1.1
:

2011
1.1
1.6
1.3
-0.2
-2.4
-0.2
1.1
0.2
0.8
1.1
1.4
0.9
1.1
-0.6
-0.5
2.9
0.7
0.8
-0.1
1.3
0.4
-0.6
-0.6
0.1
4.7
1.8
2.0
0.6
0.9
0.8
1.5
:

Autumn 2012
forecast
2013
0.9
1.5
3.1
0.0
-2.7
-1.3
0.9
-0.3
-1.5
0.8
1.6
0.7
1.2
-0.9
-0.5
2.9
0.6
0.5
1.1
1.4
0.5
2.0
2.6
0.2
3.3
2.3
2.0
0.9
0.7
-1.1
2.1
:

2012
0.9
1.4
2.2
-0.8
-2.8
-1.0
0.9
-0.9
-0.7
0.9
1.4
0.6
1.2
-1.3
-0.6
2.7
0.6
0.4
0.7
1.3
0.3
0.9
2.9
0.0
3.8
2.1
2.2
0.7
0.6
-0.3
1.7
:

TABLE 14 : Output gap relative to potential GDP (deviation of actual output from potential output as % of potential GDP, 1993-2014) ¹
Autumn 2012
forecast
2013
-1.5
-0.9
1.0
-0.5
-14.4
-4.8
-2.9
-3.4
-2.2
-1.9
-0.1
-3.1
-0.8
-4.4
-4.2
-1.0
-1.8
-2.7
-1.8
-2.7
-2.3
-0.2
-1.6
-3.0
-2.7
-3.3
-1.1
-3.4
-2.7
-4.8
-1.4
:

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
0.7
0.5
0.4
3.2
0.2
1.6
1.7
1.3
0.8
2.7
2.2
1.1
0.7
2.8
:
:
1.6
:
-0.6
:
1.3
-1.6
:
:
0.8
:
0.1
0.8
:
:
0.5
:

2003-07
0.8
-0.7
6.6
1.1
1.2
1.3
2.0
1.4
-0.1
1.3
-1.5
-0.6
-0.1
-0.4
2.3
0.9
1.3
0.7
2.7
2.1
1.8
5.6
6.2
2.8
0.1
4.4
1.6
2.3
1.1
9.9
1.5
:

1993-97
-0.9
-0.3
:
-0.6
-0.1
-2.7
-1.5
-0.3
:
-1.5
:
-0.8
-0.8
-0.9
:
:
-2.8
:
:
:
-1.0
:
:
:
:
:
-3.5
-0.8
:
:
-1.0
:

2011
-0.2
0.3
0.7
-2.8
-10.0
-4.2
-1.6
-1.8
-0.4
-1.3
0.3
-1.8
-0.1
-2.6
-1.5
0.0
-1.5
-1.5
-2.2
0.2
-3.6
-5.1
-2.1
-2.0
0.0
-1.9
0.0
-2.4
-1.6
-4.2
-1.9
:

2010
-0.9
-1.1
-5.9
-4.4
-5.4
-4.8
-2.2
-2.0
-0.1
-1.8
-0.3
-1.9
-1.6
-1.6
-2.6
-0.4
-3.4
-2.2
-3.8
-0.3
-4.0
-10.6
-8.0
-3.6
0.4
-2.5
-1.8
-2.7
-2.3
-3.4
-2.2
:

2009
-2.1
-3.9
-9.3
-4.1
-1.6
-4.2
-2.8
-3.8
0.2
-3.8
-2.3
-2.7
-2.8
-3.1
-3.5
-2.2
-5.9
-3.5
-3.7
-1.0
-4.8
-11.1
-9.8
-4.8
0.8
0.8
-6.0
-3.7
-3.5
0.1
-3.4
:

2008
1.8
2.0
4.6
0.3
1.6
0.5
1.4
1.6
3.6
1.5
1.3
2.2
2.0
-0.1
6.4
6.2
3.5
1.6
4.8
6.1
1.5
7.1
8.8
2.4
3.0
10.4
0.4
1.1
1.7
10.5
0.5
:

2012
-1.3
-0.3
1.0
-1.5
-13.0
-4.6
-2.3
-3.2
-2.0
-1.8
-0.1
-2.7
-0.5
-4.3
-3.2
-0.1
-2.0
-2.3
-2.1
-2.2
-3.3
-1.8
-2.0
-3.2
-1.4
-3.1
-1.0
-3.4
-2.5
-5.8
-1.6
:

¹ When comparing output gaps between the spring and the autumn forecast it has to be taken into account that the overall revisions to the forecast

   may have led to changes in the estimates for potential output.

154

19.10.2012

Spring 2012
forecast

2012
1.0
1.6
2.0
-1.0
-2.3
-1.1
1.2
-0.5
0.4
1.3
1.1
0.8
1.3
-1.4
-0.1
2.7
0.8
0.6
0.7
1.4
0.3
1.0
1.6
0.1
3.4
2.2
1.7
0.9
0.7
:
:
:

2013
1.1
1.6
2.7
-0.3
-1.9
-1.2
1.2
-0.1
0.5
1.4
1.3
0.9
1.4
-0.3
0.3
2.6
0.9
0.7
1.2
1.6
0.5
1.9
2.4
0.3
3.2
2.5
1.7
1.1
0.9
:
:
:

Spring 2012
forecast

2012
-1.4
-0.9
-1.9
-1.2
-10.7
-4.4
-2.8
-2.9
-1.9
-2.4
-0.2
-3.7
-0.6
-4.6
-4.4
-1.4
-2.1
-2.6
-3.3
-2.1
-2.3
-3.1
-2.5
-2.7
-0.9
-3.7
-1.0
-3.7
-2.7
:
:
:

2013
-1.3
-0.8
-0.8
0.9
-9.0
-3.6
-2.7
-2.3
-2.0
-1.7
0.4
-3.9
-0.3
-4.0
-4.1
-1.1
-1.5
-2.2
-2.5
-2.2
-1.4
-1.5
-1.4
-2.0
-1.5
-3.3
-0.6
-3.1
-2.3
:
:
:

2014
1.0
1.6
3.7
0.8
-2.7
-1.3
0.9
0.0
-1.2
1.1
1.9
0.8
1.3
-0.2
-0.2
3.1
0.7
0.6
1.4
1.4
0.7
2.8
2.5
0.3
3.0
2.6
2.1
1.1
0.9
-1.3
2.4
:

2014
-0.9
-0.5
1.3
0.8
-11.5
-2.7
-2.6
-2.5
-1.7
-1.5
0.1
-2.6
-0.1
-3.4
-3.2
-1.1
-1.2
-1.9
-1.2
-2.2
-1.7
0.9
-0.5
-2.1
-3.1
-3.2
-0.7
-2.5
-2.0
-2.1
-1.2
:

TABLE 15 : Deflator of gross domestic product (percentage change on preceding year, 1993-2014)
5-year
averages
1998-02
1.6
0.5
5.6
5.2
3.6
3.4
1.4
2.5
2.8
1.8
2.8
3.3
0.9
3.5
7.0
6.1
2.2
1.8
9.8
4.1
2.1
3.4
0.5
10.2
6.0
40.2
1.4
1.7
2.1
4.8
1.7
-1.1

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

1993-97
1.7
1.9
:
2.7
9.9
3.8
1.3
3.9
2.9
2.6
2.5
1.9
1.5
4.8
20.1
9.8
1.9
2.6
146.6
12.0
1.5
25.9
66.3
22.0
25.2
104.7
2.4
2.7
17.8
:
2.0
0.0

2003-07
2.2
0.9
7.0
2.5
3.1
4.0
2.1
2.3
3.8
4.6
2.5
1.8
1.8
2.7
3.3
3.5
0.8
2.0
6.0
1.7
2.2
10.4
4.6
4.4
2.5
14.9
1.5
2.5
2.2
3.9
2.9
-1.3

2008
2.1
0.8
5.4
-3.2
4.7
2.4
2.5
2.5
4.6
0.4
3.0
2.1
1.7
1.6
4.1
2.9
2.9
1.9
8.4
1.9
4.2
13.0
9.6
5.3
3.1
15.3
3.1
3.0
2.4
5.7
2.2
-1.3

2009
1.2
1.2
-1.4
-4.6
2.3
0.1
0.7
2.1
0.1
0.5
2.4
0.1
1.5
0.9
3.6
-1.2
1.5
0.9
4.3
2.3
1.0
-1.2
-3.4
3.6
3.7
4.2
2.1
1.3
1.2
2.9
0.9
-0.5

2010
2.0
0.9
0.7
-2.2
1.1
0.4
1.1
0.4
1.9
7.6
2.9
1.1
1.6
1.1
-1.1
0.5
0.4
0.8
2.8
-1.4
3.9
-1.3
2.0
2.5
1.4
6.0
0.8
2.8
1.2
0.9
1.3
-2.2

TABLE 16 : Price deflator of private consumption (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.6
0.9
4.9
4.3
3.9
2.8
1.1
2.5
2.5
2.1
1.3
3.0
1.1
2.9
7.1
6.5
2.5
1.8
6.3
3.7
2.0
2.6
0.9
9.8
6.7
36.3
1.3
1.0
2.0
4.5
1.7
-0.8

1993-97
1.7
2.0
:
2.5
9.5
4.2
1.3
4.6
:
2.3
:
2.2
2.2
4.6
18.6
:
1.6
2.9
159.2
10.5
1.8
:
:
:
25.7
106.5
3.0
3.0
18.8
:
2.1
0.5

2003-07
2.5
1.4
4.4
2.5
3.2
3.4
2.0
2.5
3.0
2.5
1.8
1.9
2.1
2.9
3.4
4.8
0.9
2.1
4.4
1.7
1.4
7.3
2.2
4.7
1.8
8.9
1.2
2.3
2.2
2.8
2.6
-0.7

2008
3.3
1.6
7.8
1.5
4.2
3.6
2.9
3.1
4.4
3.4
3.2
1.1
2.3
2.5
5.5
4.5
3.5
2.6
7.2
4.8
2.7
16.2
10.9
5.3
4.3
10.0
3.1
3.4
3.0
5.6
3.3
0.2

2009
-0.7
0.0
-1.3
-6.7
0.7
-1.1
-0.6
-0.1
0.7
0.9
2.6
-0.5
0.4
-2.3
1.1
0.1
1.4
-0.4
1.5
0.8
1.3
3.2
4.5
3.9
2.5
3.7
2.1
1.4
0.2
3.2
0.1
-2.5

2010
2.0
2.0
2.6
-2.1
4.0
2.0
1.1
1.5
2.1
1.7
3.1
1.3
1.9
1.6
1.5
1.0
2.0
1.7
2.4
0.3
2.5
-1.8
1.3
3.9
2.5
7.9
1.5
3.7
2.1
1.1
1.9
-1.7

Autumn 2012
forecast
2013
2.1
1.4
3.1
1.3
-1.2
1.9
1.5
1.6
1.5
3.3
2.5
1.4
1.6
1.5
1.0
1.8
1.9
1.5
2.3
1.3
1.6
2.0
2.7
4.3
2.1
4.4
1.5
2.2
1.7
2.8
2.7
-0.9

2012
2.2
1.2
3.2
1.7
-0.5
0.2
1.7
1.4
1.6
1.9
2.8
1.5
2.0
0.3
1.1
2.8
2.7
1.3
1.0
1.1
1.3
2.5
2.3
4.5
2.2
4.4
1.0
2.7
1.6
2.1
1.8
-1.6

Autumn 2012
forecast
2013
1.8
1.7
3.9
1.3
-0.8
2.0
1.6
2.0
2.0
2.1
2.0
2.6
1.8
0.9
2.2
1.9
1.9
1.7
2.7
1.1
1.8
2.2
3.1
5.3
2.6
4.8
1.3
1.9
1.8
3.2
2.7
-1.0

2012
2.6
1.5
4.1
1.9
1.1
2.3
1.8
2.6
2.9
2.7
2.5
2.7
2.4
2.3
2.8
3.5
3.1
2.1
3.0
3.3
2.2
2.6
3.4
5.7
3.8
3.6
1.0
2.8
2.3
3.4
1.8
-1.5

2014
1.8
1.6
3.2
1.4
-0.4
1.4
1.7
1.6
1.2
2.2
2.4
1.3
2.2
1.2
0.9
2.1
1.8
1.6
2.5
1.1
1.5
2.1
3.0
3.9
1.3
3.5
2.0
2.3
1.7
2.0
2.7
0.4

2014
1.4
1.8
3.2
1.4
-0.4
1.3
2.0
1.7
1.9
1.9
2.0
2.0
1.9
1.3
1.6
1.9
1.8
1.7
2.8
1.1
1.6
2.3
3.0
3.9
2.4
3.2
1.8
1.9
1.8
1.9
2.9
0.0

2011
2.0
0.8
2.9
0.2
1.0
1.0
1.3
1.3
2.7
5.1
2.3
1.2
2.2
0.7
1.0
1.6
3.1
1.2
5.0
-0.8
0.8
5.9
5.4
3.1
3.1
8.1
1.0
2.7
1.5
2.1
2.1
-2.1

2011
3.1
2.1
5.0
1.5
3.4
2.9
2.1
2.8
3.3
2.6
0.9
2.3
3.6
3.4
1.7
3.8
3.4
2.5
3.8
0.5
2.5
4.7
4.2
4.5
4.8
5.8
1.3
4.7
2.9
2.4
2.4
-1.1

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
2.1
1.6
2.9
1.2
-0.7
0.9
1.5
2.1
2.3
1.4
1.7
1.6
1.9
0.7
0.3
2.0
2.7
1.6
3.3
1.9
2.0
2.1
2.1
4.6
3.2
3.5
1.0
2.7
1.8
1.3
1.9
-1.2

2013
2.2
1.8
2.9
1.2
-0.4
0.7
1.8
2.2
2.0
3.0
2.6
1.7
1.5
1.3
1.5
2.1
2.1
1.7
2.9
1.1
1.5
1.6
3.0
3.6
2.3
3.9
1.3
2.3
1.8
1.7
2.3
1.0

Spring 2012
forecast

2012
2.8
2.1
3.6
1.7
-0.4
1.8
1.6
3.2
2.9
2.7
2.0
2.2
2.4
3.1
2.2
2.5
3.0
2.2
3.0
3.2
2.6
2.6
3.2
5.5
3.7
3.4
1.1
2.9
2.4
1.8
2.0
-0.3

2013
2.0
1.7
3.2
1.2
-0.3
1.1
1.5
2.3
2.3
2.1
2.2
1.8
1.8
1.3
1.7
1.9
2.3
1.7
3.2
2.0
1.5
1.8
3.0
3.9
3.0
3.3
1.3
1.9
1.8
1.8
2.6
0.0

155

European Economic Forecast, Autumn 2012

TABLE 17 : Harmonised index of consumer prices (national index if not available), (percentage change on preceding year, 1993-2014)

19.10.2012

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.7
1.2
5.0
3.7
3.4
2.8
1.4
2.2
2.6
2.0
2.8
3.0
1.5
3.1
7.8
8.0
2.1
1.9
8.8
4.2
2.1
2.7
1.9
9.7
7.2
41.0
1.5
1.2
3.4
4.0
2.3
-0.4

1993-97
2.1
2.4
37.7
1.9
9.6
3.9
1.7
3.9
3.7
1.4
3.6
2.2
2.4
4.1
16.8
:
1.2
2.9
169.0
:
1.9
35.2
75.5
22.2
25.8
108.4
2.1
2.3
20.8
106.4
2.7
0.8

2003-07
2.0
1.8
3.9
2.8
3.3
3.2
2.0
2.3
2.5
3.0
2.1
1.7
1.8
2.7
3.6
4.9
1.0
2.2
5.9
1.8
1.6
6.5
2.4
5.4
2.1
9.5
1.5
1.9
2.3
2.7
2.9
-0.1

2008
4.5
2.8
10.6
3.1
4.2
4.1
3.2
3.5
4.4
4.1
4.7
2.2
3.2
2.7
5.5
3.9
3.9
3.3
12.0
6.3
3.6
15.3
11.1
6.0
4.2
7.9
3.3
3.6
3.7
5.8
3.8
1.4

2009
0.0
0.2
0.2
-1.7
1.3
-0.2
0.1
0.8
0.2
0.0
1.8
1.0
0.4
-0.9
0.9
0.9
1.6
0.3
2.5
0.6
1.1
3.3
4.2
4.0
4.0
5.6
1.9
2.2
1.0
2.2
-0.4
-1.4

2010
2.3
1.2
2.7
-1.6
4.7
2.0
1.7
1.6
2.6
2.8
2.0
0.9
1.7
1.4
2.1
0.7
1.7
1.6
3.0
1.2
2.2
-1.2
1.2
4.7
2.7
6.1
1.9
3.3
2.1
1.1
1.6
-0.7

2011
3.5
2.5
5.1
1.2
3.1
3.1
2.3
2.9
3.5
3.7
2.5
2.5
3.6
3.6
2.1
4.1
3.3
2.7
3.4
2.1
2.7
4.2
4.1
3.9
3.9
5.8
1.4
4.5
3.1
2.2
3.2
-0.3

Autumn 2012
forecast
2013
1.8
1.9
4.1
1.3
-0.8
2.1
1.7
2.0
1.5
1.9
2.2
2.4
1.8
0.9
2.2
1.9
2.5
1.8
2.6
1.1
2.0
2.1
3.1
5.3
2.6
4.9
1.3
2.1
2.0
3.2
2.0
-0.1

2012
2.6
2.1
4.3
2.0
1.1
2.5
2.3
3.3
3.2
2.9
2.9
2.8
2.4
2.9
2.8
3.7
3.0
2.5
2.5
3.6
2.4
2.4
3.4
5.6
3.8
3.5
1.0
2.7
2.7
3.4
2.1
-0.2

2014
1.6
1.8
3.3
1.4
-0.4
1.3
1.7
1.7
1.3
1.8
2.2
1.6
1.9
1.3
1.6
2.0
2.2
1.6
2.7
1.1
1.7
2.3
3.0
3.9
2.4
3.3
1.8
1.9
1.8
2.1
2.1
0.2

TABLE 18 : Profiles of quarterly harmonised index of consumer prices (percentage change on corresponding quarter in previous year, 2012-14) 

2012/1
3.2
2.4
4.6
1.7
1.7
1.9
2.6
3.6
3.2
3.1
2.3
2.9
2.7
3.3
2.5
4.0
3.0
2.7
1.9
4.0
2.8
3.3
3.6
5.6
4.2
2.7
0.9
3.5
2.9
:
2.8
-0.5

2012/2
2.5
2.1
4.2
1.9
1.1
1.9
2.3
3.6
3.4
2.7
4.0
2.6
2.3
2.8
2.5
3.6
3.0
2.5
1.8
3.8
2.2
2.4
2.8
5.5
4.0
2.1
0.9
2.7
2.6
:
1.9
-0.4

2012/3
2.4
2.1
4.1
2.3
0.8
2.8
2.3
3.4
4.0
2.9
3.4
2.6
2.4
3.0
3.2
3.8
3.3
2.5
3.0
3.4
2.4
1.9
3.2
6.0
3.9
4.2
0.9
2.4
2.6
:
1.7
0.1

2012/4
2.0
2.0
4.3
1.9
0.7
3.5
2.0
2.8
2.4
2.8
1.8
3.0
2.3
2.4
2.8
3.4
2.9
2.4
3.2
3.2
2.0
2.1
3.8
5.2
3.4
5.3
1.1
2.2
2.4
:
1.9
-0.1

2013/1
1.8
1.9
5.0
1.7
0.4
3.2
1.8
2.2
1.4
2.2
2.8
2.9
1.9
1.1
2.6
1.9
3.3
2.1
2.6
1.8
2.1
2.2
3.6
5.5
2.9
5.4
0.9
2.2
2.2
:
1.8
0.3

2013/2
1.8
1.9
4.4
1.3
-0.4
2.7
1.8
1.8
1.5
1.8
2.2
2.5
1.9
1.0
2.3
1.7
2.3
1.9
2.4
1.1
1.7
2.2
3.1
5.1
2.6
5.5
1.1
2.1
2.0
:
2.1
0.2

2013/3
2.0
1.9
3.7
1.2
-1.3
1.8
1.6
2.1
1.8
2.0
2.1
2.2
1.8
0.9
2.1
2.1
2.0
1.8
2.5
0.9
1.5
2.2
3.0
5.4
2.6
4.8
1.5
2.0
1.9
:
2.1
-0.5

2013/4
1.7
1.9
3.4
1.0
-1.9
0.6
1.4
1.8
1.3
1.8
1.9
2.2
1.8
0.7
1.9
2.1
2.3
1.5
2.7
0.5
2.6
2.1
2.7
5.3
2.3
3.8
1.6
1.9
1.7
:
2.1
-0.4

2014/1
1.7
1.9
2.8
2.3
-1.3
0.5
1.7
1.8
1.6
1.8
1.9
1.7
1.9
1.3
1.7
1.9
1.5
1.6
2.6
0.9
1.6
2.2
3.0
4.6
2.2
3.6
1.7
2.0
1.7
:
2.1
0.3

2014/2
1.7
1.8
3.1
1.6
-0.1
0.9
1.7
1.9
1.3
1.8
2.1
1.7
1.9
1.3
1.5
2.0
2.5
1.6
2.7
1.0
1.9
2.3
2.9
4.0
2.2
3.4
1.8
1.9
1.8
:
2.1
0.2

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

156

Spring 2012
forecast

2012
2.9
2.3
3.9
1.7
-0.5
1.9
2.1
3.2
3.4
3.0
2.0
2.5
2.4
3.0
2.2
2.9
3.0
2.4
2.6
3.3
2.6
2.6
3.1
5.5
3.7
3.1
1.1
2.9
2.6
2.4
2.5
-0.3

2014/3
1.7
1.7
3.6
1.1
0.2
1.5
1.7
1.5
1.1
1.9
2.5
1.6
1.9
1.3
1.5
1.9
2.5
1.6
2.6
1.1
1.7
2.3
3.0
3.6
2.6
3.2
1.8
1.9
1.7
:
2.1
0.1

2013
1.8
1.8
3.4
1.2
-0.3
1.1
1.9
2.3
2.5
2.0
2.2
1.8
2.0
1.1
1.7
1.9
2.5
1.8
2.7
2.2
1.5
2.1
2.9
3.9
2.9
3.4
1.5
2.0
1.9
2.0
2.0
0.8

2014/4
1.7
1.7
3.8
0.8
-0.4
2.4
1.7
1.6
1.4
1.9
2.5
1.5
1.9
1.4
1.6
2.0
2.5
1.7
2.9
1.3
1.7
2.3
3.1
3.3
2.5
3.1
1.9
1.9
1.8
:
2.1
0.1

 
TABLE 19 : Price deflator of exports of goods in national currency (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
0.8
0.1
2.4
2.7
3.8
1.2
-0.9
2.0
2.3
0.2
3.0
-0.3
0.4
1.1
5.1
3.2
-2.0
0.4
:
-0.3
0.9
0.1
-1.1
4.7
4.9
33.2
-0.4
-1.8
3.7
5.2
-0.9
-2.6

1993-97
-0.1
0.4
:
1.9
6.5
3.9
0.1
4.9
:
0.5
:
0.2
0.6
2.2
14.3
:
2.2
1.8
:
:
0.2
:
:
:
17.4
88.3
2.6
1.8
:
:
-0.5
-1.6

2003-07
1.8
0.3
3.6
-2.7
2.4
2.2
0.7
1.4
1.9
3.1
-1.8
1.5
1.3
1.3
2.5
1.5
0.2
0.9
7.1
-0.3
2.3
10.9
5.2
-0.2
3.4
6.4
1.0
1.0
1.0
3.3
3.1
0.3

2008
3.5
0.9
5.4
-3.3
5.4
1.9
3.4
2.8
1.7
3.2
-0.1
4.6
2.0
2.3
0.7
0.9
-1.5
2.1
8.1
-4.8
5.4
7.7
13.2
0.6
-1.8
21.0
3.1
12.7
3.1
4.8
5.0
-4.1

2009
-6.3
-2.4
-2.7
1.2
-5.0
-5.1
-4.8
-3.1
0.3
-1.9
-4.6
-8.4
-2.3
-6.1
-2.1
-5.4
-8.6
-4.2
-13.2
-0.5
-6.2
-9.4
-16.7
2.1
13.5
3.4
1.2
1.2
-2.9
-4.5
-6.8
-10.9

2010
4.9
2.5
4.9
1.1
7.9
2.6
2.3
2.8
1.3
4.0
0.2
6.7
3.3
5.2
2.2
3.1
5.0
3.3
11.0
-1.3
5.4
8.7
12.4
1.7
0.4
6.3
-0.8
6.2
3.4
1.8
5.1
-1.6

2011
4.5
3.1
3.9
0.1
8.2
5.1
3.7
4.4
2.8
0.2
12.1
5.1
3.2
6.4
4.5
3.9
5.1
3.9
11.1
0.9
5.1
12.2
13.5
3.4
7.4
9.5
-1.7
6.6
4.1
6.1
7.6
-2.6

Autumn 2012
forecast
2013
1.9
0.8
1.6
1.3
-0.1
1.5
1.2
2.0
2.0
2.5
1.1
1.2
1.6
1.4
1.5
1.5
2.1
1.3
3.1
1.0
2.2
2.1
1.7
0.6
1.0
3.0
1.0
1.0
1.3
1.3
0.6
-1.0

2012
2.1
1.1
1.3
1.0
3.1
2.6
3.1
2.1
2.0
3.1
-0.7
2.2
1.5
1.6
1.9
3.6
1.5
1.9
3.2
2.7
2.3
4.0
4.0
5.0
3.5
7.2
-1.0
-0.1
1.8
1.8
0.2
-2.0

TABLE 20 : Price deflator of imports of goods in national currency (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.2
0.0
1.3
0.6
3.9
0.8
-1.0
1.8
1.9
1.4
2.5
-1.0
0.1
0.8
4.9
3.6
-1.8
0.3
:
-0.6
-0.2
1.3
-2.5
5.3
5.7
29.4
1.4
-2.0
3.1
4.0
-1.2
-2.5

1993-97
0.4
0.0
:
2.3
5.4
3.8
0.1
5.1
:
0.5
:
-0.5
1.0
1.7
11.2
:
1.6
1.7
:
:
-0.2
:
:
:
17.9
92.7
3.4
2.0
:
:
-0.9
-0.3

2003-07
2.2
0.6
1.8
-1.7
2.7
2.1
1.1
2.7
2.4
1.5
1.2
1.4
1.6
1.5
3.1
2.2
2.9
1.4
6.2
0.3
1.4
8.5
3.8
0.8
2.6
1.6
1.4
1.1
1.4
1.6
4.4
6.3

2008
6.6
2.7
5.8
2.3
5.9
4.3
4.1
6.3
4.2
1.3
7.7
4.9
4.0
5.5
2.5
2.8
0.6
4.2
10.8
-3.0
5.1
9.7
9.3
1.7
0.3
17.2
4.3
13.6
5.2
4.1
11.6
7.4

2009
-9.5
-8.0
-3.6
-4.7
-1.5
-9.2
-7.9
-9.7
-2.3
-2.9
-0.8
-8.5
-5.0
-10.6
-5.9
-4.7
-9.9
-8.1
-13.7
-9.3
-10.3
-6.7
-11.5
1.1
8.7
2.2
-1.0
1.8
-6.1
-2.4
-12.4
-23.2

2010
7.1
5.2
6.6
4.9
5.9
4.9
4.5
7.1
2.2
-1.8
5.9
7.3
5.0
5.1
7.3
4.0
7.6
5.7
8.5
1.0
2.1
7.6
10.9
1.9
1.8
3.6
0.3
5.3
5.1
0.4
6.8
5.9

2011
6.7
6.0
8.2
5.5
7.6
8.8
6.2
8.6
3.4
-3.4
6.4
4.9
6.2
8.6
6.4
5.5
7.5
6.5
9.5
3.2
6.8
6.1
14.2
5.1
9.5
7.6
-0.4
8.7
6.6
6.6
8.9
5.9

Autumn 2012
forecast
2013
1.8
1.2
1.8
1.2
0.6
1.7
1.7
1.0
2.1
1.5
1.0
1.9
1.7
0.8
2.1
1.7
2.9
1.5
3.6
0.7
2.1
2.1
2.2
0.2
1.5
2.6
1.0
0.4
1.4
1.3
0.5
-1.0

2012
2.6
1.8
2.5
1.0
4.1
5.5
3.3
3.7
3.8
3.3
0.5
2.5
1.8
1.9
3.1
4.0
1.5
2.8
6.4
4.5
3.6
4.3
4.5
6.0
6.0
6.5
-0.3
-0.1
2.7
3.8
0.7
2.0

2014
1.7
1.1
2.2
1.0
1.0
0.8
0.8
1.9
1.0
2.5
1.8
1.0
1.7
1.5
1.4
1.6
2.1
1.2
3.4
1.0
2.2
2.1
2.0
0.4
1.0
2.7
1.5
0.7
1.2
1.5
1.6
-0.7

2014
1.6
1.3
2.1
1.1
1.2
1.0
1.5
0.4
1.9
1.5
1.7
1.5
1.3
1.1
2.0
1.6
2.9
1.3
3.6
1.2
2.1
2.1
2.2
0.5
2.7
1.7
1.5
0.9
1.3
1.2
2.2
0.7

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
2.4
2.9
3.1
-1.3
-0.3
2.0
1.3
4.1
1.6
1.5
5.2
2.0
3.0
2.3
2.6
3.6
1.5
2.5
6.0
4.0
1.0
2.2
5.5
7.6
4.5
6.9
1.0
3.7
2.8
2.4
2.0
-0.3

2013
1.8
1.6
2.0
-1.3
-0.2
1.0
1.2
1.8
2.1
2.5
1.9
1.0
1.6
1.6
1.8
1.8
2.1
1.4
1.2
0.5
2.2
2.0
2.5
1.9
1.0
5.0
1.5
0.9
1.4
2.0
0.7
-0.7

Spring 2012
forecast

2012
2.9
3.9
3.5
1.3
0.0
4.0
2.6
5.8
3.5
3.3
5.4
2.8
3.6
2.8
4.2
4.0
1.5
3.6
5.8
4.5
0.9
2.5
6.0
7.8
5.0
7.5
1.5
2.7
3.6
3.2
3.7
0.2

2013
1.8
1.2
1.9
1.2
0.7
3.0
0.9
0.0
2.1
1.5
1.7
1.0
1.9
1.4
1.3
1.8
2.9
1.3
2.0
1.0
2.1
1.9
2.5
1.4
2.0
2.1
1.5
0.8
1.3
1.3
1.4
0.7

157

European Economic Forecast, Autumn 2012

TABLE 21 : Terms of trade of goods (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
-0.3
0.2
1.1
2.1
-0.1
0.4
0.1
0.2
0.4
-1.2
0.4
0.8
0.3
0.3
0.2
-0.4
-0.2
0.2
:
0.3
1.1
-1.2
1.5
-0.6
-0.8
2.9
-1.7
0.1
0.6
1.1
0.3
0.0

1993-97
-0.5
0.4
:
-0.3
1.1
0.1
-0.1
-0.2
:
0.0
:
0.6
-0.4
0.6
2.8
:
0.6
0.1
:
:
0.3
:
:
:
-0.5
-2.2
-0.7
-0.2
:
:
0.4
-1.3

2003-07
-0.4
-0.3
1.8
-1.1
-0.2
0.1
-0.3
-1.2
-0.5
1.5
-3.0
0.1
-0.3
-0.2
-0.6
-0.6
-2.6
-0.6
0.9
-0.6
0.8
2.2
1.3
-1.0
0.8
4.8
-0.4
-0.1
-0.4
1.6
-1.3
-5.6

2008
-2.9
-1.8
-0.4
-5.5
-0.5
-2.3
-0.7
-3.4
-2.4
1.9
-7.2
-0.3
-2.0
-3.1
-1.8
-1.9
-2.1
-2.0
-2.5
-1.9
0.3
-1.8
3.6
-1.1
-2.1
3.2
-1.2
-0.7
-2.1
0.6
-5.9
-10.7

TABLE 22 : Total population (percentage change on preceding year, 1993)

5-year
averages
1998-02
0.3
0.1
-0.6
1.4
0.4
0.9
0.6
0.1
1.2
1.2
0.7
0.7
0.3
0.5
0.1
0.0
0.2
0.4
-1.1
-0.2
0.3
-1.0
-0.6
-0.3
0.0
-0.7
0.2
0.3
0.2
-0.4
1.1
0.2

1993-97
0.3
0.4
:
0.6
0.8
0.2
0.4
0.0
1.9
1.4
0.8
0.6
0.3
0.3
-0.1
0.3
0.4
:
-0.5
0.0
0.4
-1.4
-0.7
-0.2
0.1
-0.2
0.4
0.3
:
-0.2
1.2
0.3

2003-07
0.6
-0.1
-0.3
2.1
0.4
1.7
0.7
0.8
1.7
1.5
0.7
0.3
0.5
0.5
0.2
0.1
0.3
0.6
-0.5
0.2
0.3
-1.0
-0.5
-0.2
-0.1
-0.2
0.5
0.6
0.4
0.0
0.9
0.1

2008
0.8
-0.2
-0.1
1.8
0.4
1.6
0.6
0.8
2.7
1.8
0.8
0.4
0.4
0.1
0.2
0.2
0.5
0.5
-0.5
1.0
0.6
-1.1
-0.5
-0.2
0.0
-0.2
0.8
0.7
0.5
-0.1
0.9
-0.1

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

158

2009
3.5
6.0
0.9
6.3
-3.5
4.5
3.3
7.4
2.7
1.0
-3.8
0.1
2.8
5.1
4.1
-0.7
1.4
4.2
0.6
9.8
4.5
-2.9
-5.9
1.1
4.4
1.2
2.2
-0.6
3.4
-2.1
6.4
16.1

2009
0.8
-0.3
0.0
0.6
0.4
0.7
0.5
0.6
2.8
1.8
0.4
0.5
0.3
0.1
1.0
0.2
0.5
0.4
-0.5
0.6
0.5
-1.7
-0.6
-0.2
0.1
-0.2
0.9
0.6
0.3
-0.1
0.9
-0.1

2010
-2.1
-2.5
-1.6
-3.6
1.8
-2.2
-2.2
-3.9
-0.9
5.9
-5.4
-0.6
-1.6
0.1
-4.8
-0.8
-2.4
-2.2
2.3
-2.3
3.3
1.1
1.4
-0.2
-1.4
2.6
-1.1
0.8
-1.7
1.5
-1.6
-7.1

2010
0.9
-0.1
0.0
0.2
0.2
0.3
0.5
0.5
2.5
1.9
0.5
0.5
0.3
0.0
0.4
0.2
0.5
0.3
-0.7
0.2
0.4
-2.1
-1.6
-0.2
0.1
-0.2
0.8
0.8
0.3
-0.3
0.8
-0.3

2011
-2.1
-2.7
-4.0
-5.1
0.6
-3.3
-2.4
-3.9
-0.6
3.7
5.4
0.2
-2.9
-2.1
-1.8
-1.5
-2.3
-2.5
1.4
-2.2
-1.6
5.8
-0.6
-1.7
-1.9
1.7
-1.4
-2.0
-2.4
-0.5
-1.1
-8.0

2011
0.9
0.0
0.0
0.3
-0.1
0.1
0.5
0.4
2.7
2.3
0.7
0.5
0.4
0.1
0.2
0.2
0.4
0.3
-1.6
-0.2
0.4
-1.9
-7.8
-0.3
0.5
-0.2
0.7
0.8
0.2
-0.3
0.7
0.6

Autumn 2012
forecast
2013
0.1
-0.4
-0.2
0.0
-0.7
-0.2
-0.5
1.0
-0.1
1.0
0.1
-0.7
-0.1
0.6
-0.6
-0.2
-0.8
-0.2
-0.5
0.3
0.1
0.0
-0.5
0.4
-0.5
0.4
0.0
0.6
-0.1
0.0
0.1
0.0

2012
-0.5
-0.7
-1.2
0.0
-1.0
-2.7
-0.1
-1.5
-1.7
-0.2
-1.2
-0.2
-0.3
-0.3
-1.2
-0.4
0.0
-0.8
-3.0
-1.7
-1.3
-0.3
-0.5
-1.0
-2.4
0.7
-0.7
-0.1
-0.8
-1.9
-0.5
-3.9

Autumn 2012
forecast
2013
0.8
0.0
0.0
0.7
0.1
-0.1
0.5
0.4
1.0
1.7
0.2
0.5
0.4
0.1
0.2
0.4
0.5
0.3
-0.6
0.0
0.3
-0.7
-0.5
-0.2
0.0
-0.2
0.7
0.7
0.2
-0.3
0.9
-0.1

2012
0.8
0.1
0.0
0.4
0.1
-0.1
0.5
0.4
1.0
1.8
0.5
0.5
0.4
0.0
0.1
0.3
0.5
0.3
-0.6
-0.3
0.3
-1.0
-0.8
-0.2
0.0
-0.2
0.7
0.5
0.2
-0.2
0.7
-0.1

2014
0.0
-0.1
0.1
-0.1
-0.2
-0.2
-0.7
1.5
-0.9
1.0
0.1
-0.5
0.4
0.4
-0.6
0.0
-0.8
0.0
-0.2
-0.2
0.1
0.0
-0.2
-0.1
-1.7
1.0
0.0
-0.2
-0.1
0.3
-0.7
-1.4

2014
0.8
0.0
0.0
0.9
0.1
-0.1
0.5
0.4
0.8
1.6
0.0
0.4
0.4
0.0
0.1
0.4
0.5
0.2
-0.6
0.0
0.3
-0.7
-0.5
-0.2
-0.1
-0.2
0.6
0.5
0.2
-0.3
0.9
-0.1

19.10.2012

Spring 2012
forecast

2012
-0.5
-1.0
-0.4
-2.5
-0.3
-1.9
-1.2
-1.6
-1.9
-1.7
-0.2
-0.7
-0.6
-0.5
-1.5
-0.4
0.0
-1.0
0.2
-0.5
0.1
-0.2
-0.5
-0.2
-0.5
-0.6
-0.5
1.0
-0.8
-0.7
-1.7
-0.5

2013
0.0
0.3
0.1
-2.5
-0.8
-1.9
0.3
1.8
0.0
1.0
0.2
0.0
-0.3
0.2
0.5
0.0
-0.8
0.1
-0.8
-0.5
0.1
0.1
0.0
0.5
-1.0
2.8
0.0
0.1
0.1
0.6
-0.7
-1.4

Spring 2012
forecast

2012
0.8
0.0
0.0
0.4
0.3
-0.1
0.5
0.5
0.8
1.8
0.5
0.5
0.3
0.0
0.2
0.1
0.5
0.3
-1.0
0.3
0.3
-0.7
-0.8
-0.1
0.0
-0.2
0.7
0.7
0.3
0.0
0.8
-0.1

2013
0.8
0.0
0.0
0.7
0.4
-0.1
0.6
0.4
0.8
1.7
0.4
0.5
0.3
0.1
0.2
0.1
0.2
0.3
-1.0
0.3
0.3
-0.6
-0.5
-0.1
0.0
-0.2
0.7
0.7
0.3
0.0
0.8
-0.1

TABLE 23 : Total employment (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.3
0.8
-1.1
4.8
1.2
3.9
1.8
1.3
1.9
4.8
0.9
1.7
0.5
1.7
1.0
-0.9
1.7
1.6
-1.7
-0.9
0.7
-0.3
-1.5
1.0
-1.9
-3.8
1.7
1.0
0.8
1.8
1.0
-1.0

1993-97
0.3
-0.2
-4.0
3.6
0.5
0.6
-0.1
-0.7
:
2.5
1.2
1.4
0.0
0.1
:
:
-0.2
0.0
:
:
0.6
-5.2
-2.1
:
0.0
-2.9
-1.2
0.8
:
:
2.3
0.3

2003-07
1.0
0.3
1.9
3.6
2.0
3.1
0.7
0.7
3.2
3.0
1.3
0.3
0.9
-0.1
0.9
1.3
1.2
1.0
3.0
0.9
0.8
2.6
1.9
0.0
1.9
-0.4
0.6
0.9
1.0
2.7
1.0
0.4

2008
1.8
1.2
0.2
-1.1
1.2
-0.2
0.3
-0.4
2.1
5.0
2.6
1.5
1.8
0.5
2.6
3.2
2.6
0.7
2.6
2.3
1.7
0.9
-0.7
-1.8
3.9
0.0
0.9
0.7
0.9
1.1
-0.7
-0.5

2009
-0.2
0.1
-10.0
-8.1
-0.6
-6.5
-1.5
-2.9
-0.5
1.1
-0.3
-1.1
-1.5
-2.6
-1.8
-2.0
-2.6
-2.1
-2.6
-1.8
-2.4
-13.2
-6.8
-2.5
0.4
-2.0
-2.4
-1.6
-1.9
-1.8
-5.0
-1.6

2010
0.7
0.6
-4.8
-4.2
-2.6
-2.3
-0.3
-0.9
0.0
1.8
2.4
-0.6
0.5
-1.5
-2.2
-1.5
-0.1
-0.6
-4.7
-1.0
-2.3
-4.8
-5.1
0.7
0.5
-1.4
1.2
0.2
-0.5
-5.1
-0.8
-0.5

2011
1.4
1.4
7.0
-2.1
-5.6
-1.7
0.5
0.1
0.5
2.9
2.5
0.5
1.4
-1.5
-1.6
1.8
1.1
0.2
-4.2
0.3
-0.4
-8.1
2.0
0.4
1.0
0.4
2.2
0.4
0.2
-2.3
0.6
1.7

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

TABLE 24 : Unemployment rate (number of unemployed as a percentage of total labour force, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
7.8
8.5
11.4
5.1
11.1
12.5
9.3
9.9
3.9
2.4
7.1
3.3
4.0
5.1
6.8
17.3
9.9
9.0
16.5
7.8
4.7
13.5
15.1
6.6
15.6
6.5
6.5
5.5
8.7
13.1
4.7
4.8

1993-97
9.4
8.6
8.7
12.8
9.2
19.7
10.9
10.8
:
2.9
5.4
6.1
4.1
6.7
:
:
15.1
10.6
:
4.0
7.1
16.0
6.0
:
12.9
:
9.4
8.5
:
:
5.8
3.1

2003-07
8.2
10.1
7.6
4.5
9.5
9.7
9.0
7.4
4.6
4.4
7.1
4.5
4.7
8.1
6.1
15.4
8.2
8.7
10.4
7.3
4.7
9.2
8.4
6.8
16.0
7.1
7.0
5.0
8.6
12.2
5.2
4.5

2008
7.0
7.5
5.5
6.3
7.7
11.3
7.8
6.7
3.8
4.9
6.0
3.1
3.8
8.5
4.4
9.6
6.4
7.6
5.6
4.4
3.4
8.0
5.8
7.8
7.1
5.8
6.2
5.6
7.1
8.4
5.8
4.0

2009
7.9
7.8
13.8
11.9
9.5
18.0
9.5
7.8
5.5
5.1
6.9
3.7
4.8
10.6
5.9
12.1
8.2
9.6
6.8
6.7
6.0
18.2
13.7
10.0
8.2
6.9
8.3
7.6
9.0
9.1
9.3
5.1

2010
8.3
7.1
16.9
13.7
12.6
20.1
9.7
8.4
6.4
4.6
6.9
4.5
4.4
12.0
7.3
14.5
8.4
10.1
10.3
7.3
7.5
19.8
17.8
11.2
9.6
7.3
8.4
7.8
9.7
11.8
9.6
5.1

2011
7.2
5.9
12.5
14.4
17.7
21.7
9.6
8.4
7.9
4.8
6.5
4.4
4.2
12.9
8.2
13.6
7.8
10.1
11.3
6.7
7.6
16.2
15.4
10.9
9.7
7.4
7.5
8.0
9.7
13.5
8.9
4.6

¹ Series following Eurostat definition, based on the labour force survey.

Autumn 2012
forecast
2013
0.3
0.2
0.8
0.0
-2.1
-2.7
0.0
-1.0
-0.6
0.8
1.3
-0.6
0.7
-1.6
-1.7
0.1
-0.2
-0.5
-0.2
-0.2
0.1
1.3
1.0
0.3
0.1
0.8
0.5
0.5
-0.2
-0.5
0.7
0.1

2012
0.1
1.1
1.8
-1.2
-7.9
-4.5
-0.1
-1.3
-4.0
1.9
0.9
-0.2
1.1
-4.0
-1.6
0.3
0.3
-0.8
-2.0
-0.4
-0.3
1.8
1.7
1.0
0.3
0.4
0.4
0.5
-0.4
-1.8
1.7
-0.2

Autumn 2012
forecast
2013
7.7
5.6
9.8
14.7
24.0
26.6
10.7
11.5
13.1
6.4
6.3
6.1
4.7
16.4
9.3
13.5
8.1
11.8
12.7
7.3
7.7
14.3
12.4
10.8
10.5
7.3
7.4
8.0
10.9
13.9
7.9
4.7

2012
7.5
5.5
10.5
14.8
23.6
25.1
10.2
10.6
12.1
5.4
6.3
5.4
4.5
15.5
8.5
13.5
7.9
11.3
12.7
7.0
7.7
15.2
13.5
10.8
10.1
7.4
7.5
7.9
10.5
14.2
8.2
4.8

2014
0.5
0.4
1.0
0.9
1.4
0.2
0.6
0.4
-0.3
1.3
1.6
-0.1
0.9
0.3
-0.6
0.5
0.2
0.4
0.4
0.0
0.2
2.1
1.4
0.6
0.4
0.9
1.0
1.0
0.6
0.6
1.1
0.1

2014
7.8
5.5
9.0
14.2
22.2
26.1
10.7
11.8
13.9
6.4
6.2
6.2
4.2
15.9
9.6
13.1
8.0
11.7
12.5
7.1
7.6
12.7
10.9
10.6
10.3
7.3
6.9
7.8
10.7
12.9
7.5
4.6

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
0.0
1.0
0.6
-0.6
-4.8
-3.7
0.4
-1.1
-1.5
2.0
0.6
-0.2
0.4
-3.3
-1.7
0.5
-0.1
-0.5
-1.9
-0.1
0.1
0.7
0.6
1.0
0.3
0.4
0.1
0.4
-0.2
-1.3
1.8
0.1

2013
0.4
0.4
1.2
0.7
-0.2
-1.5
0.4
-0.1
0.6
1.1
1.1
-0.1
0.7
0.2
-1.0
0.7
-0.1
0.0
-0.2
0.2
0.3
1.2
0.5
1.4
0.4
1.1
0.4
0.5
0.2
0.0
0.8
0.1

Spring 2012
forecast

2012
7.6
5.5
11.6
14.3
19.7
24.4
10.2
9.5
9.8
5.2
6.6
5.7
4.3
15.5
9.1
13.2
7.9
11.0
12.0
7.2
7.7
14.8
13.8
10.6
9.8
7.2
7.7
8.5
10.3
13.4
8.2
4.8

2013
7.9
5.3
10.5
13.6
19.6
25.1
10.3
9.7
9.9
5.9
6.3
6.2
4.2
15.1
9.4
12.7
7.7
11.0
11.9
7.2
7.6
13.2
12.7
9.6
9.6
7.1
7.7
8.4
10.3
12.7
8.0
4.7

159

European Economic Forecast, Autumn 2012

TABLE 25 : Compensation of employees per head (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
2.9
1.3
11.1
5.9
6.6
2.7
2.3
1.7
4.4
3.3
4.7
4.7
2.5
4.9
9.4
9.3
3.3
2.3
17.4
7.8
3.9
5.6
5.7
12.9
10.1
52.3
3.6
5.0
3.7
6.2
4.3
-0.7

1993-97
3.0
2.4
:
4.0
11.2
4.2
2.2
4.5
:
3.1
7.3
2.5
3.0
6.9
:
:
2.4
3.2
:
:
2.9
43.6
:
:
30.7
104.5
5.0
3.3
:
:
2.7
1.2

2003-07
2.4
0.7
14.6
5.5
4.0
3.7
3.0
3.0
3.6
3.1
3.3
3.1
2.3
3.3
6.6
8.3
3.3
2.4
7.7
6.4
3.6
21.5
12.3
7.7
2.4
20.7
3.5
4.4
2.8
5.1
4.1
-1.3

2008
3.6
2.1
9.7
5.3
3.6
6.9
2.8
3.8
3.2
3.4
5.0
3.3
3.1
3.0
7.2
7.0
4.4
3.4
16.3
4.2
3.5
15.7
14.3
7.2
8.9
31.9
1.5
1.5
3.3
6.9
3.3
0.3

2009
1.2
0.2
-3.2
-0.9
3.5
4.4
2.0
1.7
2.5
1.9
3.6
2.5
2.5
2.8
1.8
2.5
2.3
1.8
9.4
-0.6
1.8
-12.7
-9.9
-1.7
3.5
-1.9
1.6
2.7
1.9
1.0
1.9
-3.7

2010
1.4
2.4
1.8
-3.1
-2.6
0.0
2.6
2.3
2.7
2.7
-0.3
1.5
1.3
1.4
3.9
5.1
1.8
1.9
11.2
3.6
2.7
-6.7
-0.4
-0.3
4.7
7.6
2.8
2.7
2.3
4.5
3.0
0.3

2011
3.1
3.0
-0.2
0.2
-3.4
0.7
2.8
1.2
3.3
2.0
0.8
1.8
2.3
-0.8
1.6
1.1
3.4
2.2
7.3
2.7
1.6
18.2
3.6
3.0
4.0
3.7
0.8
2.0
2.3
3.0
3.3
0.5

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

TABLE 26 : Real compensation of employees per head ¹ (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.3
0.4
5.9
1.5
2.6
-0.1
1.3
-0.7
1.8
1.2
3.3
1.6
1.3
2.0
2.2
2.6
0.8
0.5
10.4
3.9
1.8
2.9
4.8
2.8
3.2
11.7
2.3
3.9
1.7
1.6
2.6
0.1

1993-97
1.2
0.4
:
1.5
1.6
0.0
0.8
0.0
:
0.8
:
0.3
0.7
2.2
:
:
0.9
0.4
:
:
1.1
:
:
:
4.0
-1.0
2.0
0.3
:
:
0.6
0.7

2003-07
0.0
-0.7
9.8
3.0
0.8
0.3
0.9
0.5
0.6
0.6
1.5
1.2
0.2
0.4
3.1
3.4
2.4
0.2
3.2
4.6
2.1
13.2
9.9
2.8
0.6
10.9
2.3
2.1
0.6
2.2
1.4
-0.6

2008
0.3
0.5
1.7
3.7
-0.6
3.2
-0.1
0.7
-1.2
0.0
1.7
2.1
0.9
0.5
1.7
2.4
0.9
0.8
8.6
-0.6
0.8
-0.4
3.1
1.9
4.4
19.9
-1.5
-1.9
0.2
1.2
0.0
0.1

2009
1.9
0.2
-1.9
6.3
2.8
5.6
2.7
1.8
1.8
1.0
1.0
3.0
2.1
5.2
0.8
2.4
0.9
2.3
7.8
-1.4
0.5
-15.5
-13.8
-5.4
0.9
-5.4
-0.5
1.3
1.7
-2.2
1.8
-1.3

2010
-0.7
0.3
-0.8
-1.0
-6.3
-1.9
1.5
0.7
0.6
1.0
-3.3
0.2
-0.6
-0.2
2.4
4.0
-0.3
0.2
8.5
3.3
0.2
-5.1
-1.7
-4.0
2.2
-0.2
1.3
-0.9
0.2
3.4
1.0
2.0

2011
0.0
0.9
-5.0
-1.3
-6.5
-2.2
0.8
-1.5
0.0
-0.6
-0.1
-0.5
-1.3
-4.1
-0.1
-2.7
-0.1
-0.3
3.4
2.2
-0.8
12.9
-0.6
-1.5
-0.8
-1.9
-0.4
-2.6
-0.6
0.6
0.8
1.6

¹ Deflated by the price deflator of private consumption.

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

160

Autumn 2012
forecast
2013
2.5
2.8
5.4
0.0
-6.8
1.4
1.8
1.3
-0.3
2.7
2.1
2.1
2.1
1.5
0.4
2.1
3.3
2.0
4.8
2.0
1.6
2.6
2.6
1.0
3.4
4.9
3.0
2.4
2.1
1.3
3.8
1.2

2012
3.1
2.6
5.0
0.7
-6.8
0.4
2.0
1.1
-0.9
2.3
1.1
2.4
2.9
-2.9
0.5
1.3
3.3
1.9
5.2
2.8
1.7
3.1
3.5
4.5
3.5
4.6
2.9
3.0
2.1
1.4
1.9
0.5

Autumn 2012
forecast
2013
0.7
1.1
1.4
-1.3
-6.0
-0.6
0.2
-0.7
-2.3
0.6
0.0
-0.5
0.3
0.6
-1.8
0.2
1.3
0.3
2.1
0.9
-0.2
0.4
-0.5
-4.1
0.8
0.1
1.7
0.5
0.2
-1.9
1.1
2.2

2012
0.5
1.0
0.9
-1.2
-7.8
-1.8
0.2
-1.4
-3.7
-0.4
-1.3
-0.3
0.5
-5.1
-2.2
-2.1
0.2
-0.1
2.1
-0.5
-0.5
0.5
0.1
-1.2
-0.3
0.9
1.9
0.2
-0.1
-1.9
0.1
2.1

2014
2.6
3.1
5.8
0.1
-1.2
0.4
1.7
1.2
0.5
3.2
2.0
2.3
1.9
0.4
1.5
2.5
3.4
2.0
5.5
2.6
1.8
3.4
3.4
5.5
4.6
3.9
3.4
2.9
2.3
1.4
3.7
1.2

2014
1.2
1.3
2.5
-1.3
-0.8
-0.9
-0.3
-0.5
-1.4
1.3
0.0
0.3
0.0
-0.9
-0.1
0.6
1.6
0.3
2.6
1.5
0.2
1.0
0.4
1.6
2.2
0.7
1.6
0.9
0.5
-0.5
0.8
1.2

19.10.2012

Spring 2012
forecast

2012
3.1
2.7
4.0
-0.8
-8.0
0.1
2.1
1.5
-0.8
3.2
1.5
1.9
3.6
-3.1
0.5
2.3
3.3
1.9
5.2
2.0
1.7
1.7
2.1
3.7
4.7
3.2
2.9
2.4
2.1
0.9
2.5
1.2

2013
2.3
2.8
5.4
0.1
-1.3
0.1
2.0
1.4
-0.3
3.5
2.4
1.5
1.9
-0.6
1.0
2.6
3.3
1.9
5.1
2.1
1.6
2.2
3.3
2.9
5.1
4.2
3.1
2.6
2.1
1.3
4.1
1.2

Spring 2012
forecast

2012
0.3
0.5
0.4
-2.4
-7.6
-1.6
0.5
-1.6
-3.6
0.5
-0.5
-0.4
1.1
-6.0
-1.7
-0.2
0.2
-0.2
2.1
-1.2
-0.9
-0.8
-1.0
-1.7
1.0
-0.2
1.7
-0.5
-0.3
-0.9
0.4
1.5

2013
0.3
1.1
2.1
-1.1
-1.0
-1.0
0.5
-0.8
-2.5
1.4
0.2
-0.3
0.1
-1.9
-0.7
0.7
0.9
0.2
1.9
0.1
0.1
0.4
0.3
-1.0
2.0
1.0
1.8
0.6
0.3
-0.5
1.5
1.2

TABLE 27 : Labour productivity (real GDP per occupied person) (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
1.0
0.8
7.0
3.3
2.5
0.2
0.8
0.5
2.3
1.2
2.0
1.2
2.2
1.4
2.9
3.6
1.9
1.0
6.0
3.1
1.1
6.0
6.3
2.9
5.3
6.0
1.7
2.2
2.0
0.8
2.3
1.2

1993-97
1.7
1.4
:
4.1
1.1
1.4
1.5
2.1
:
0.8
3.8
1.6
2.0
2.1
:
:
3.5
1.7
:
:
2.2
5.9
-0.2
:
5.9
5.2
3.3
2.4
:
:
1.3
1.1

2003-07
1.2
1.4
6.1
1.3
2.3
0.4
1.3
0.6
0.6
1.5
0.9
2.0
1.7
1.1
3.9
5.6
2.6
1.3
3.3
4.7
1.2
6.6
6.6
3.3
3.2
6.9
2.9
2.2
2.0
2.0
1.7
1.4

2008
-0.8
-0.1
-4.3
-1.1
-1.4
1.1
-0.4
-0.8
1.4
-5.5
1.3
0.3
-0.4
-0.5
0.8
2.4
-2.2
-0.2
3.5
0.8
-2.4
-4.2
3.6
2.7
1.2
7.3
-1.5
-1.7
0.1
1.0
0.4
-0.6

2009
-2.6
-5.2
-4.5
2.9
-2.5
2.9
-1.6
-2.7
-1.3
-5.1
-2.1
-2.6
-2.3
-0.3
-6.1
-3.0
-6.1
-2.4
-2.9
-2.8
-3.5
-5.3
-8.6
-4.4
1.2
-4.7
-2.7
-2.4
-2.4
-5.2
1.9
-4.0

2010
1.7
3.6
8.5
3.6
-2.4
2.0
1.9
2.7
1.3
1.1
1.0
2.2
1.5
3.0
3.5
6.0
3.4
2.6
5.3
3.5
3.6
4.0
7.0
0.6
3.4
-0.2
5.3
1.6
2.5
3.9
3.2
5.0

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

TABLE 28 : Unit labour costs, whole economy ¹ (percentage change on preceding year, 1993-2014)
5-year
averages
1998-02
1.9
0.5
3.8
2.5
3.9
2.6
1.5
1.2
2.1
2.2
2.6
3.4
0.3
3.4
6.3
5.4
1.4
1.5
10.8
4.6
2.7
-0.4
-0.5
9.7
4.6
43.8
1.9
2.7
2.0
5.4
2.0
-1.8

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

1993-97
1.3
1.0
:
-0.1
10.0
2.8
0.7
2.3
:
2.3
3.3
0.9
0.9
4.7
:
:
-1.0
1.5
:
:
0.7
35.6
:
:
23.5
94.5
1.7
0.9
:
:
1.4
0.1

2003-07
1.2
-0.7
8.0
4.2
1.7
3.2
1.6
2.4
3.0
1.5
2.3
1.0
0.6
2.1
2.6
2.5
0.7
1.3
4.3
1.7
2.4
13.9
5.4
4.2
-0.7
13.0
0.6
2.2
1.5
3.0
2.3
-2.7

2008
4.4
2.3
14.6
6.4
5.1
5.7
3.2
4.7
1.8
9.4
3.6
3.0
3.5
3.5
6.4
4.4
6.7
3.8
12.5
3.4
6.1
20.7
10.4
4.4
7.5
22.9
3.1
3.2
4.1
5.8
2.9
0.9

2009
3.8
5.6
1.4
-3.7
6.2
1.5
3.7
4.6
3.9
7.3
5.8
5.3
4.9
3.1
8.5
5.7
9.0
4.3
12.7
2.2
5.6
-7.9
-1.5
2.8
2.2
2.9
4.4
5.3
4.4
6.6
0.0
0.3

2010
-0.3
-1.1
-6.2
-6.5
-0.1
-2.0
0.6
-0.4
1.4
1.6
-1.3
-0.8
-0.2
-1.6
0.4
-0.9
-1.6
-0.7
5.6
0.0
-0.9
-10.4
-6.9
-0.9
1.3
7.9
-2.4
1.2
-0.4
0.6
-0.3
-4.5

Autumn 2012
forecast
2013
0.4
0.6
2.3
1.0
-2.2
1.3
0.4
0.5
-1.0
-0.1
0.3
0.9
0.2
0.6
0.1
1.9
1.0
0.6
1.6
1.0
1.5
2.3
2.1
0.0
1.7
1.3
1.4
0.4
0.7
0.5
1.5
0.7

2012
-0.3
-0.3
0.7
1.7
2.0
3.2
0.3
-1.0
1.7
-1.5
0.1
-0.1
-0.3
1.1
-0.7
2.4
-0.2
0.3
2.8
-0.9
0.9
2.5
1.2
-2.1
2.1
0.4
0.7
-0.8
0.3
-0.1
0.4
2.2

Autumn 2012
forecast
2013
2.1
2.1
3.1
-1.0
-4.7
0.1
1.4
0.8
0.8
2.8
1.8
1.3
1.9
0.9
0.2
0.2
2.2
1.2
3.2
0.9
0.1
0.3
0.5
1.0
1.7
3.5
1.5
2.0
1.4
0.8
2.2
0.4

2012
3.4
2.8
4.3
-0.9
-8.6
-2.7
1.6
2.2
-2.6
3.9
1.0
2.4
3.2
-4.0
1.2
-1.0
3.5
1.4
2.3
3.7
0.9
0.6
2.3
6.7
1.4
4.1
2.2
3.8
1.9
1.5
1.6
-1.6

2014
1.1
1.6
3.0
1.2
-0.8
0.6
0.6
0.4
-0.4
0.2
0.5
1.5
1.2
0.5
1.5
2.5
1.0
1.0
1.6
2.0
1.1
1.8
2.2
0.8
2.2
1.7
1.4
1.0
1.1
0.8
1.5
1.8

2014
1.5
1.5
2.7
-1.1
-0.5
-0.2
1.1
0.8
0.9
3.0
1.5
0.8
0.8
-0.1
0.1
0.0
2.3
0.9
3.8
0.6
0.6
1.6
1.1
4.7
2.3
2.2
1.9
1.8
1.2
0.6
2.1
-0.6

2011
0.4
1.6
1.2
3.6
-1.6
2.2
1.2
0.3
0.0
-1.2
-0.5
0.5
1.3
-0.1
2.2
1.4
1.6
1.1
6.1
1.6
1.2
14.8
3.8
1.2
3.3
2.0
1.6
0.4
1.4
2.4
1.2
-2.4

2011
2.7
1.4
-1.4
-3.2
-1.8
-1.4
1.6
0.9
3.3
3.3
1.3
1.3
1.0
-0.7
-0.6
-0.4
1.8
0.9
1.1
1.1
0.5
3.0
-0.1
1.8
0.7
1.7
-0.8
1.6
0.9
0.6
2.0
2.9

¹ Compensation of employees per head divided by labour productivity per head, defined as GDP in volume divided by total employment.

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
-0.1
-0.4
1.0
1.2
0.1
2.0
0.0
-0.4
0.7
-0.9
0.6
-0.7
0.3
0.0
0.3
1.4
0.9
0.1
2.4
0.1
1.0
1.5
1.8
-1.3
2.4
0.9
0.1
0.1
0.4
0.1
0.1
1.8

2013
0.9
1.3
2.6
1.2
0.2
1.2
0.9
0.5
-0.2
1.0
0.8
0.8
1.0
0.0
1.6
2.2
1.7
1.0
2.1
1.3
1.1
2.4
3.0
-0.4
2.2
1.7
1.7
1.2
1.2
0.8
1.3
1.6

Spring 2012
forecast

2012
3.2
3.0
3.0
-1.9
-8.1
-1.8
2.1
1.9
-1.5
4.1
0.9
2.6
3.2
-3.1
0.2
1.0
2.3
1.6
2.7
1.9
0.6
0.3
0.4
5.1
2.2
2.3
2.7
2.3
1.8
0.8
2.3
-0.6

2013
1.4
1.5
2.8
-1.2
-1.5
-1.1
1.1
0.9
-0.1
2.4
1.6
0.7
0.9
-0.6
-0.7
0.4
1.6
0.8
3.0
0.8
0.5
-0.1
0.3
3.3
2.8
2.5
1.4
1.3
1.0
0.5
2.8
-0.4

161

European Economic Forecast, Autumn 2012

TABLE 29 : Real unit labour costs ¹ (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
0.2
-0.1
-1.7
-2.6
0.3
-0.8
0.1
-1.2
-0.7
0.4
-0.2
0.1
-0.7
-0.1
-0.6
-0.7
-0.8
-0.4
0.9
0.4
0.6
-3.6
-1.0
-0.4
-1.3
2.5
0.5
1.0
-0.3
0.5
0.3
-0.8

1993-97
-0.4
-0.8
:
-2.7
0.1
-1.0
-0.6
-1.6
:
-0.3
0.8
-1.0
-0.6
-0.1
:
:
-2.9
-1.0
:
:
-0.8
7.8
:
:
-1.4
-5.0
-0.7
-1.7
:
:
-0.6
0.1

2003-07
-1.0
-1.6
1.0
1.7
-1.4
-0.7
-0.4
0.2
-0.7
-2.9
-0.2
-0.8
-1.1
-0.6
-0.7
-0.9
-0.1
-0.8
-1.6
0.0
0.1
3.2
0.7
-0.2
-3.2
-1.7
-0.9
-0.3
-0.9
-0.8
-0.5
-1.4

2008
2.2
1.5
8.7
9.9
0.3
3.2
0.7
2.1
-2.7
8.9
0.5
0.8
1.8
1.9
2.1
1.5
3.7
1.8
3.7
1.5
1.8
6.9
0.7
-0.9
4.3
6.6
-0.1
0.2
1.4
0.1
0.7
2.2

¹ Nominal unit labour costs divided by GDP price deflator.

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

TABLE 30 : Nominal bilateral exchange rates against Ecu/euro (1993-2014)

5-year
averages
1998-02
:
:
15.67
:
:
:
:
:
0.58
:
0.42
:
:
:
206.20
42.45
:
:
1.95
34.68
7.45
0.60
3.90
250.59
3.94
2.07
8.92
0.64
:
7.45
0.99
118.79

1993-97
39.70
1.92
15.37
0.79
294.90
159.54
6.57
1954.94
0.59
39.70
0.45
2.16
13.52
195.14
158.58
38.01
6.06
:
0.46
34.68
7.46
0.70
4.93
160.52
3.03
0.35
8.96
0.78
:
6.41
1.21
129.93

2003-07
:
:
15.65
:
:
:
:
:
0.58
:
0.43
:
:
:
:
38.22
:
:
1.95
29.93
7.45
0.68
3.45
253.79
4.13
3.66
9.21
0.68
:
7.43
1.25
141.91

2008
:
:
15.65
:
:
:
:
:
:
:
:
:
:
:
:
31.24
:
:
1.96
24.95
7.46
0.70
3.45
251.51
3.51
3.68
9.62
0.80
:
7.22
1.47
152.45

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

162

2009
2.6
4.4
2.8
1.0
3.8
1.4
3.0
2.4
3.8
6.8
3.4
5.2
3.4
2.2
4.7
7.0
7.4
3.3
8.1
-0.1
4.5
-6.7
2.0
-0.7
-1.4
-1.2
2.3
3.9
3.2
3.6
-0.9
0.8

2009
:
:
15.65
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
26.43
7.45
0.71
3.45
280.33
4.33
4.24
10.62
0.89
:
7.34
1.39
130.34

2010
-2.3
-2.0
-6.8
-4.3
-1.3
-2.4
-0.4
-0.8
-0.5
-5.6
-4.1
-1.8
-1.8
-2.6
1.5
-1.4
-2.0
-1.5
2.7
1.4
-4.6
-9.2
-8.8
-3.3
-0.1
1.8
-3.2
-1.6
-1.5
-0.3
-1.6
-2.4

2010
:
:
15.65
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
25.28
7.45
0.71
3.45
275.48
3.99
4.21
9.54
0.86
:
7.29
1.33
116.24

2011
0.6
0.6
-4.2
-3.4
-2.9
-2.4
0.3
-0.4
0.5
-1.7
-0.9
0.0
-1.2
-1.3
-1.6
-2.0
-1.3
-0.3
-3.7
1.9
-0.4
-2.8
-5.3
-1.3
-2.3
-5.9
-1.8
-1.1
-0.6
-1.5
-0.1
5.1

2011
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
24.59
7.45
0.71
3.45
279.37
4.12
4.24
9.03
0.87
:
7.44
1.39
110.96

Autumn 2012
forecast
2013
0.0
0.8
0.0
-2.3
-3.6
-1.7
-0.1
-0.8
-0.7
-0.5
-0.7
-0.2
0.3
-0.6
-0.8
-1.5
0.3
-0.1
0.8
-0.3
-1.4
-1.7
-2.2
-3.2
-0.5
-0.8
0.1
-0.2
-0.2
-2.0
-0.4
1.4

2012
1.2
1.6
1.1
-2.5
-8.2
-2.9
0.0
0.7
-4.2
1.9
-1.8
1.0
1.1
-4.3
0.1
-3.7
0.8
0.2
1.3
2.6
-0.4
-1.8
-0.1
2.2
-0.8
-0.2
1.2
1.1
0.3
-0.5
-0.2
0.0

Autumn 2012
forecast
2013
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
24.91
7.46
0.70
3.45
281.70
4.09
4.57
8.63
0.81
:
7.50
1.30
101.89

2012
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
25.09
7.44
0.70
3.45
288.85
4.18
4.47
8.70
0.81
:
7.51
1.29
101.67

2014
-0.3
-0.1
-0.4
-2.5
-0.1
-1.6
-0.5
-0.8
-0.4
0.7
-0.9
-0.4
-1.4
-1.3
-0.9
-2.1
0.5
-0.5
1.2
-0.5
-0.9
-0.5
-1.8
0.8
1.0
-1.3
0.0
-0.5
-0.5
-1.4
-0.6
-1.1

2014
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
24.91
7.46
0.70
3.45
281.70
4.09
4.57
8.63
0.81
:
7.50
1.30
101.89

19.10.2012

Spring 2012
forecast

2012
1.1
1.4
0.0
-3.1
-7.4
-2.7
0.6
-0.2
-3.7
2.7
-0.8
1.0
1.2
-3.8
0.0
-1.0
-0.3
0.2
-0.6
-0.1
-1.3
-1.8
-1.7
0.5
-0.9
-1.2
1.7
-0.4
0.0
-0.5
0.4
0.6

2013
-0.7
-0.4
-0.2
-2.3
-1.1
-1.7
-0.6
-1.3
-2.1
-0.6
-1.0
-0.9
-0.5
-1.8
-2.2
-1.6
-0.6
-0.8
0.1
-0.3
-1.0
-1.7
-2.7
-0.3
0.5
-1.3
0.1
-0.9
-0.8
-1.2
0.5
-1.4

Spring 2012
forecast

2012
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
24.87
7.44
0.70
3.45
296.99
4.20
4.37
8.86
0.83
:
7.50
1.31
105.92

2013
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
1.96
24.80
7.44
0.70
3.45
297.07
4.18
4.37
8.87
0.82
:
7.49
1.31
106.53

TABLE 31 : Nominal effective exchange rates to rest of a group ¹ of industrialised countries (percentage change on preceding year, 1998-2014)

19.10.2012

Statistical Annex

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
-0.1
0.0
0.1
-1.9
-0.1
0.0
-0.1
0.2
0.9
-0.1
0.3
-0.1
0.2
-0.5
-3.9
-2.1
-0.3
-0.1
3.5
3.5
-0.2
2.2
6.2
-2.3
-0.6
-22.3
-1.4
1.7
0.7
:
3.1
1.5

2003-07
1.4
1.8
1.1
2.5
1.3
1.3
1.7
1.8
1.2
0.8
1.7
1.1
1.1
1.1
-0.5
5.3
1.7
3.6
1.2
2.7
1.4
-2.9
1.3
0.0
1.0
-0.3
1.6
0.3
5.3
:
-4.7
-2.6

2008
1.9
1.8
1.4
4.0
2.0
2.1
2.1
1.9
2.8
1.6
2.3
2.0
0.9
1.6
0.5
8.5
1.9
4.2
1.7
12.2
2.2
0.9
0.9
0.8
9.1
-8.4
-1.7
-12.9
1.3
:
-4.3
11.2

2009
1.0
1.3
2.4
0.7
1.9
1.3
0.9
1.0
1.8
1.6
-0.9
1.5
1.3
0.8
2.0
6.8
1.6
2.8
2.6
-3.6
2.3
2.0
2.5
-8.4
-17.7
-11.5
-8.4
-11.4
-5.4
:
6.4
16.1

2010
-2.4
-3.6
-3.0
-3.5
-2.3
-2.4
-3.1
-3.2
-2.5
-2.0
-3.6
-2.4
-2.5
-1.8
-1.8
-2.2
-3.9
-6.7
-2.2
2.6
-4.0
-2.9
-2.5
-0.3
6.2
-1.3
7.4
0.3
-7.5
:
-3.1
6.1

2011
0.3
0.1
-0.4
0.8
1.0
0.4
0.2
0.4
0.2
0.0
0.3
0.2
-0.1
0.3
0.3
0.2
-0.1
0.5
1.3
3.1
-0.4
0.4
0.4
-1.0
-2.8
0.4
5.9
-0.9
1.1
:
-5.3
5.9

Autumn 2012
forecast
2013
0.0
0.0
-0.2
0.2
0.1
0.0
0.1
0.1
0.0
0.0
0.0
0.0
0.0
0.0
-0.1
-0.2
0.0
0.0
0.2
0.6
-0.3
0.0
-0.2
2.6
2.2
-2.2
0.8
0.6
0.7
:
-1.2
0.2

2012
-2.0
-2.4
-1.5
-3.7
-1.4
-1.8
-2.4
-2.2
-2.0
-1.5
-2.2
-1.8
-1.3
-1.5
-0.7
-0.5
-2.7
-4.5
-0.7
-3.0
-2.6
0.1
-1.4
-4.4
-2.6
-6.2
1.1
4.4
-5.4
:
3.8
4.1

2014
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
:
0.0
0.0

¹  36 countries :  EU, TR, CH, NO, US, CA, JP, AU, MX and NZ.

TABLE 32 : Relative unit labour costs, to rest of a group ¹ of industrialised countries (nat. curr.) (percentage change on preceding year, 1998-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
-0.3
-2.3
1.4
0.4
-0.4
0.0
-0.9
-1.6
-1.8
0.2
0.7
1.4
-2.1
1.3
3.8
2.7
-1.0
-2.4
4.3
2.2
0.7
-2.6
-3.3
7.1
2.3
38.6
-0.6
0.4
-2.4
:
-0.6
-4.1

2003-07
-0.1
-2.4
6.0
2.7
-0.3
1.7
0.2
0.9
1.3
0.2
1.2
-0.2
-0.6
0.3
1.3
1.4
-0.7
-0.8
2.1
0.6
1.1
12.0
3.1
2.9
-2.1
11.1
-1.0
0.7
-0.3
:
0.9
-4.6

2008
0.8
-1.9
8.4
2.9
0.2
1.9
-0.6
0.7
-2.5
5.3
0.3
-0.7
-0.4
-0.5
2.0
0.3
2.6
-0.6
7.0
-0.5
2.1
14.6
4.3
-0.1
3.3
17.9
-1.3
-0.5
0.4
:
-0.5
-2.4

2009
-0.2
2.1
-2.2
-6.8
1.7
-2.4
0.0
0.8
-0.5
3.0
2.5
1.2
0.8
-0.3
4.0
1.5
5.2
1.6
7.8
-2.1
1.6
-11.1
-4.5
-1.4
-2.0
-1.7
0.4
2.2
2.2
:
-3.8
-2.3

2010
0.0
-0.8
-4.6
-6.2
-0.4
-1.7
1.2
-0.1
1.6
2.0
-0.8
-0.3
0.2
-0.9
0.7
-0.6
-1.0
-0.9
5.3
0.5
-0.4
-9.0
-5.7
-0.8
1.8
8.1
-2.2
1.9
-0.4
:
0.2
-4.7

2011
1.4
0.1
-2.5
-4.7
-2.9
-2.6
0.4
-0.3
2.6
2.0
0.1
0.0
-0.2
-1.4
-1.7
-1.4
0.5
-0.5
0.5
-0.1
-0.9
2.0
-1.3
0.6
-0.4
0.9
-2.4
0.3
-0.8
:
0.0
1.0

Autumn 2012
forecast
2013
0.5
0.6
1.4
-2.7
-6.4
-1.5
-0.2
-0.8
0.4
1.1
0.3
-0.4
0.3
-0.5
-1.4
-1.4
0.5
-0.5
1.7
-0.7
-1.6
-1.3
-1.1
-0.7
0.0
1.8
-0.2
0.4
-0.8
:
0.5
-1.7

2012
1.4
1.0
1.9
-2.8
-10.6
-4.3
-0.1
0.4
-2.5
1.7
-0.7
0.4
1.0
-5.0
-1.1
-3.4
1.5
-0.3
0.5
1.5
-1.2
-1.7
0.1
4.4
-0.9
1.8
0.1
2.2
0.5
:
-0.1
-3.8

2014
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:

¹  36 countries :  EU, TR, CH, NO, US, CA, JP, AU, MX and NZ.

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

Spring 2012
forecast

2012
-1.3
-1.6
-1.1
-2.5
-0.8
-1.2
-1.6
-1.4
-1.3
-1.3
-2.4
-1.3
-0.9
-1.1
-0.4
-0.4
-1.6
-3.0
-0.5
-1.7
-1.5
0.2
-0.8
-6.7
-2.7
-3.5
0.1
3.2
-3.8
:
3.4
1.2

2013
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.3
0.0
0.0
0.0
0.0
0.3
-0.1
-0.1
0.4
0.2
:
0.1
-0.6

Spring 2012
forecast

2012
1.2
1.2
1.0
-3.9
-9.8
-3.6
0.4
0.1
-1.7
:
-1.0
0.5
1.1
-4.4
-2.0
-1.2
0.3
0.0
1.2
-0.4
-1.3
-1.7
-1.6
2.9
0.0
0.2
0.8
0.6
0.2
:
0.4
-3.0

2013
0.2
0.2
1.5
-2.6
-2.8
-2.3
0.0
-0.4
-0.9
:
0.2
-0.6
-0.4
-1.4
-2.0
-0.9
0.2
-0.8
1.7
-0.5
-0.8
-1.4
-1.0
2.0
1.6
1.1
0.1
0.1
-0.8
:
1.7
-2.4

163

European Economic Forecast, Autumn 2012

TABLE 33 : Real effective exchange rate : ulc relative to rest of a group ¹ of industrialised countries (USD) (% change on preceding year, 1998-2014)

19.10.2012

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
-0.4
-2.4
1.6
-1.5
-0.5
0.0
-1.0
-1.5
-0.9
0.1
0.9
1.3
-1.9
0.8
-0.3
0.6
-1.3
-2.6
8.0
5.8
0.5
-0.5
2.6
4.6
1.6
7.6
-2.0
2.1
-1.7
:
2.5
-2.6

2003-07
1.3
-0.6
7.1
5.2
1.0
3.0
1.8
2.7
2.4
1.0
2.9
0.9
0.4
1.4
0.8
6.8
1.0
2.7
3.3
3.4
2.5
8.8
4.4
2.9
-1.0
10.8
0.6
1.0
5.0
:
-3.8
-7.1

2008
2.6
-0.1
10.0
7.0
2.3
4.0
1.5
2.5
0.2
7.0
2.6
1.2
0.5
1.1
2.5
8.8
4.5
3.5
8.9
11.6
4.3
15.6
5.3
0.8
12.7
8.0
-3.0
-13.3
1.6
:
-4.8
8.6

2009
0.9
3.5
0.1
-6.1
3.6
-1.1
0.9
1.8
1.3
4.6
1.6
2.8
2.1
0.5
6.1
8.3
6.8
4.5
10.6
-5.6
3.9
-9.3
-2.1
-9.6
-19.3
-13.0
-8.0
-9.4
-3.3
:
2.3
13.4

¹  36 countries :  EU, TR, CH, NO, US, CA, JP, AU, MX and NZ.

Note : See note 6 on concepts and sources where countries using full time equivalents are listed.

TABLE 34 : Total expenditure, general government (as a percentage of GDP, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
49.6
47.4
37.2
33.4
45.6
39.5
52.3
47.4
37.7
39.5
42.3
45.7
52.1
42.1
46.3
47.1
50.0
47.4
40.0
43.3
54.8
37.9
38.0
49.6
43.2
36.9
56.4
39.3
46.4
:
34.7
38.9

1993-97
52.4
49.4
:
38.8
44.4
44.2
53.9
52.5
:
:
:
50.8
54.3
40.8
:
:
59.4
50.4
:
:
59.0
:
:
:
:
:
63.8
41.8
:
:
36.2
34.7

2003-07
49.7
46.3
34.0
34.4
45.5
38.7
53.1
47.9
42.8
40.2
44.6
45.7
50.4
45.2
44.9
37.3
49.4
47.1
37.7
43.9
52.8
36.2
33.5
50.3
43.4
34.9
53.3
43.3
46.5
:
36.3
36.5

2008
49.7
44.1
39.7
43.1
50.5
41.5
53.3
48.6
42.1
39.1
43.8
46.2
49.3
44.7
44.3
34.9
49.2
47.1
38.4
41.2
51.6
39.1
37.2
49.3
43.2
39.3
51.7
47.7
47.1
40.6
39.1
36.9

2009
53.6
48.2
45.5
48.7
54.0
46.3
56.8
52.0
46.2
44.6
43.3
51.4
52.6
49.7
49.1
41.5
55.9
51.2
41.4
44.7
57.8
44.5
43.7
51.5
44.6
41.1
54.7
51.4
51.1
41.3
42.8
41.9

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

164

2010
-2.4
-4.4
-7.5
-9.4
-2.8
-4.1
-1.9
-3.3
-0.9
0.0
-4.4
-2.7
-2.3
-2.7
-1.1
-2.9
-4.9
-7.6
3.0
3.1
-4.4
-11.6
-8.1
-1.0
8.1
6.6
5.1
2.2
-7.8
:
-2.9
1.1

2010
52.4
47.7
40.7
66.1
51.3
46.3
56.5
50.5
46.2
42.8
42.5
51.3
52.6
51.2
50.3
40.0
55.5
51.0
37.4
43.8
57.6
43.7
40.8
49.7
45.4
40.1
52.0
50.4
50.6
40.9
42.7
40.8

2011
1.7
0.2
-3.0
-4.0
-1.9
-2.2
0.7
0.1
2.8
2.0
0.4
0.2
-0.3
-1.1
-1.4
-1.2
0.4
0.0
1.8
3.0
-1.3
2.5
-1.0
-0.4
-3.2
1.3
3.4
-0.6
0.3
:
-5.3
7.0

2011
53.1
45.3
38.3
48.2
51.7
45.1
56.0
50.0
46.1
42.0
42.3
49.9
50.6
49.4
50.7
38.2
54.5
49.5
35.6
43.0
57.9
38.4
37.4
49.5
43.6
37.9
51.0
48.5
49.1
40.6
41.7
41.4

Autumn 2012
forecast
2013
0.5
0.6
1.2
-2.6
-6.3
-1.5
-0.2
-0.8
0.4
1.1
0.3
-0.4
0.3
-0.5
-1.5
-1.6
0.5
-0.5
1.9
-0.2
-1.9
-1.4
-1.3
1.8
2.2
-0.4
0.6
1.0
-0.1
:
-0.7
-1.5

2012
-0.6
-1.4
0.4
-6.4
-11.8
-6.1
-2.5
-1.7
-4.4
0.2
-2.8
-1.4
-0.3
-6.4
-1.8
-3.8
-1.3
-4.8
-0.2
-1.6
-3.7
-1.6
-1.3
-0.2
-3.5
-4.4
1.2
6.7
-5.0
:
3.7
0.2

Autumn 2012
forecast
2013
54.2
45.5
39.5
41.5
49.6
42.7
56.7
50.5
47.1
44.2
43.2
49.9
51.3
47.5
49.7
36.7
54.9
49.4
37.0
43.3
57.0
35.6
36.2
49.0
42.2
36.0
51.4
47.2
48.8
40.0
39.9
43.7

2012
54.1
45.2
41.2
42.6
50.7
44.3
56.3
51.0
46.9
44.3
42.6
49.9
51.6
46.7
48.8
37.6
55.3
49.5
36.4
43.6
59.6
36.8
36.8
48.9
42.8
36.1
51.4
48.4
49.1
40.4
40.4
42.8

2014
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:

2014
54.3
45.3
37.8
39.1
48.1
42.3
56.7
50.0
47.4
44.7
42.8
49.8
50.4
45.3
49.2
36.1
55.1
49.1
37.0
42.9
56.0
34.8
35.4
49.6
41.8
35.7
50.8
45.7
48.2
39.6
39.6
43.9

Spring 2012
forecast

2012
-0.1
-0.3
-0.1
-6.3
-10.6
-4.7
-1.2
-1.3
-2.9
:
-3.4
-0.8
0.2
-5.4
-2.3
-1.6
-1.3
-3.0
0.8
-2.1
-2.8
-1.5
-2.4
-3.9
-2.6
-3.4
1.0
3.8
-3.6
:
3.8
-1.8

2013
0.2
0.2
1.5
-2.6
-2.8
-2.3
0.0
-0.4
-0.9
:
0.3
-0.6
-0.4
-1.4
-2.0
-0.9
0.2
-0.8
1.7
-0.3
-0.8
-1.4
-1.0
1.9
1.9
1.0
0.1
0.5
-0.7
:
1.8
-3.0

Spring 2012
forecast

2012
53.9
45.6
41.2
44.1
49.7
42.4
56.3
50.4
46.0
43.6
44.4
50.8
51.4
47.7
48.7
37.7
54.3
49.4
35.2
43.3
58.6
38.1
36.8
48.6
43.1
36.2
52.1
47.4
48.9
39.2
40.4
43.9

2013
53.7
45.2
39.3
43.1
50.6
42.0
56.2
49.5
45.3
44.0
43.8
50.8
50.6
46.1
47.9
37.3
54.7
49.0
35.3
43.1
56.6
37.0
36.1
47.6
42.4
35.4
51.8
47.2
48.4
38.6
39.2
44.0

TABLE 35 : Total revenue, general government (as a percentage of GDP, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
49.4
45.4
36.4
35.4
41.6
38.4
50.1
45.1
34.2
43.7
35.2
45.5
50.6
38.4
43.2
39.2
53.9
45.7
40.1
38.4
55.8
35.7
35.1
43.7
39.3
33.3
57.5
39.9
45.0
:
34.4
30.9

1993-97
47.9
45.1
:
37.8
35.9
38.3
49.1
45.5
:
:
:
47.9
50.2
35.9
:
:
54.5
45.4
:
:
56.8
:
:
:
:
:
57.2
36.5
:
:
33.1
31.3

2003-07
49.2
43.7
36.0
35.7
39.4
39.7
50.0
44.6
40.6
41.0
40.2
44.9
48.4
40.8
43.3
34.7
52.9
45.0
38.8
40.7
56.3
35.4
32.6
43.1
39.1
33.1
54.9
40.2
44.3
:
32.8
32.1

2008
48.7
44.0
36.7
35.7
40.7
37.0
49.9
45.9
43.1
42.3
39.2
46.7
48.3
41.1
42.4
32.8
53.6
45.0
40.1
38.9
54.8
34.9
34.0
45.5
39.5
33.6
53.9
42.6
44.7
39.3
32.7
35.1

2009
48.1
45.1
43.5
34.7
38.3
35.1
49.2
46.5
40.1
43.9
39.4
45.8
48.5
39.6
43.1
33.5
53.4
44.9
37.1
38.9
55.2
34.7
34.3
46.9
37.2
32.1
54.0
39.9
44.2
37.1
31.0
33.1

2010
48.6
43.6
40.8
35.2
40.6
36.6
49.5
46.0
40.9
42.0
38.9
46.1
48.1
41.4
44.5
32.3
53.0
44.8
34.3
39.0
55.1
35.6
33.6
45.4
37.6
33.3
52.3
40.2
44.1
35.9
31.4
32.4

2011
49.4
44.5
39.4
34.9
42.3
35.7
50.8
46.1
39.8
41.6
39.6
45.4
48.0
45.0
44.3
33.2
53.9
45.4
33.6
39.8
56.1
35.0
31.9
53.9
38.5
32.3
51.3
40.7
44.7
35.5
31.6
33.6

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

TABLE 36 : Net lending (+) or net borrowing (-), general government (as a percentage of GDP, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
-0.3
-1.9
-0.8
2.0
-4.0
-1.2
-2.2
-2.3
-3.5
4.2
-7.0
-0.2
-1.4
-3.7
-3.1
-8.0
3.9
-1.7
0.1
-4.8
1.1
-2.2
-2.9
-5.9
-4.0
-3.6
1.1
0.6
-1.4
:
-0.3
-8.0

1993-97
-4.5
-4.3
:
-1.0
-8.6
-5.9
-4.8
-7.0
:
2.2
:
-2.8
-4.1
-5.0
:
:
-4.9
-5.0
:
:
-2.2
:
:
:
:
:
-6.6
-5.3
:
:
-3.1
-3.5

2003-07
-0.5
-2.5
2.0
1.3
-6.2
1.0
-3.1
-3.3
-2.2
0.9
-4.4
-0.9
-2.0
-4.4
-1.6
-2.6
3.5
-2.1
1.1
-3.2
3.5
-0.8
-1.0
-7.2
-4.2
-1.8
1.5
-3.2
-2.2
:
-3.5
-4.4

2008
-1.0
-0.1
-2.9
-7.4
-9.8
-4.5
-3.3
-2.7
0.9
3.2
-4.6
0.5
-0.9
-3.6
-1.9
-2.1
4.4
-2.1
1.7
-2.2
3.2
-4.2
-3.3
-3.7
-3.7
-5.7
2.2
-5.1
-2.4
-1.4
-6.4
-1.9

2009
-5.5
-3.1
-2.0
-13.9
-15.6
-11.2
-7.5
-5.4
-6.1
-0.8
-3.9
-5.6
-4.1
-10.2
-6.0
-8.0
-2.5
-6.3
-4.3
-5.8
-2.7
-9.8
-9.4
-4.6
-7.4
-9.0
-0.7
-11.5
-6.9
-4.2
-11.9
-8.8

2010
-3.8
-4.1
0.2
-30.9
-10.7
-9.7
-7.1
-4.5
-5.3
-0.8
-3.6
-5.1
-4.5
-9.8
-5.7
-7.7
-2.5
-6.2
-3.1
-4.8
-2.5
-8.1
-7.2
-4.4
-7.9
-6.8
0.3
-10.2
-6.5
-5.0
-11.3
-8.4

2011
-3.7
-0.8
1.1
-13.4
-9.4
-9.4
-5.2
-3.9
-6.3
-0.3
-2.7
-4.5
-2.5
-4.4
-6.4
-4.9
-0.6
-4.1
-2.0
-3.3
-1.8
-3.4
-5.5
4.3
-5.0
-5.5
0.4
-7.8
-4.4
-5.1
-10.1
-7.8

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

Autumn 2012
forecast
2013
50.8
45.3
39.0
34.0
44.1
36.7
53.2
48.4
41.3
42.5
40.2
47.1
48.6
43.0
45.8
33.4
53.7
46.8
35.5
39.8
55.0
34.0
33.4
46.1
39.1
33.6
51.1
40.1
45.5
35.8
32.6
35.8

2012
51.2
45.0
40.1
34.3
43.9
36.3
51.8
48.1
41.6
42.4
40.0
46.2
48.5
41.7
44.4
32.7
53.6
46.2
34.9
40.1
55.7
35.1
33.7
46.4
39.4
33.3
51.4
42.2
45.5
36.0
32.0
34.5

Autumn 2012
forecast
2013
-3.4
-0.2
-0.5
-7.5
-5.5
-6.0
-3.5
-2.1
-5.7
-1.7
-2.9
-2.9
-2.7
-4.5
-3.9
-3.2
-1.2
-2.6
-1.5
-3.4
-2.0
-1.5
-2.8
-2.9
-3.1
-2.4
-0.3
-7.2
-3.2
-4.2
-7.3
-7.9

2012
-3.0
-0.2
-1.1
-8.4
-6.8
-8.0
-4.5
-2.9
-5.3
-1.9
-2.6
-3.7
-3.2
-5.0
-4.4
-4.9
-1.8
-3.3
-1.5
-3.5
-3.9
-1.7
-3.2
-2.5
-3.4
-2.8
0.0
-6.2
-3.6
-4.4
-8.5
-8.3

2014
50.8
45.3
38.1
34.2
43.5
35.8
53.2
47.9
41.4
42.9
40.2
46.6
48.5
42.8
45.1
32.9
54.2
46.6
35.9
39.7
54.3
33.4
33.1
46.1
38.9
33.7
51.2
39.8
45.3
35.7
33.4
36.2

2014
-3.5
0.0
0.3
-5.0
-4.6
-6.4
-3.5
-2.1
-6.0
-1.8
-2.6
-3.2
-1.9
-2.5
-4.1
-3.1
-1.0
-2.5
-1.1
-3.2
-1.7
-1.4
-2.3
-3.5
-3.0
-2.0
0.4
-5.9
-2.9
-3.9
-6.2
-7.7

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
50.9
44.7
38.9
35.8
42.4
36.0
51.8
48.4
42.6
41.9
41.9
46.3
48.4
43.0
44.4
33.0
53.6
46.2
33.3
40.4
54.5
36.0
33.5
46.1
40.1
33.4
51.8
40.8
45.2
34.1
32.1
35.7

2013
50.4
44.4
38.1
35.5
42.2
35.7
52.0
48.4
42.8
41.8
40.8
46.1
48.6
43.1
44.0
32.5
54.3
46.1
33.6
40.5
54.7
34.9
33.1
44.6
39.8
33.2
51.8
40.8
45.2
33.6
32.1
36.0

Spring 2012
forecast

2012
-3.0
-0.9
-2.4
-8.3
-7.3
-6.4
-4.5
-2.0
-3.4
-1.8
-2.6
-4.4
-3.0
-4.7
-4.3
-4.7
-0.7
-3.2
-1.9
-2.9
-4.1
-2.1
-3.2
-2.5
-3.0
-2.8
-0.3
-6.7
-3.6
-5.1
-8.3
-8.2

2013
-3.3
-0.7
-1.3
-7.5
-8.4
-6.3
-4.2
-1.1
-2.5
-2.2
-2.9
-4.6
-1.9
-3.1
-3.8
-4.9
-0.4
-2.9
-1.7
-2.6
-2.0
-2.1
-3.0
-2.9
-2.5
-2.2
0.1
-6.5
-3.3
-5.0
-7.1
-8.0

165

European Economic Forecast, Autumn 2012

TABLE 37 : Interest expenditure, general government (as a percentage of GDP, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
6.6
3.2
0.3
2.1
7.0
3.3
3.0
6.5
3.2
0.3
3.4
3.7
3.4
2.9
2.3
3.5
2.8
3.9
3.7
1.0
3.7
0.8
1.4
5.7
3.2
3.8
3.5
2.7
3.7
:
3.5
3.3

1993-97
9.0
3.3
:
5.1
11.0
4.9
3.4
10.9
:
0.4
:
5.5
3.9
5.1
:
:
4.3
5.4
:
:
6.1
:
:
:
:
:
5.5
3.3
:
:
4.6
3.5

2003-07
4.4
2.9
0.2
1.1
4.7
1.9
2.7
4.8
3.3
0.2
3.5
2.3
2.8
2.7
1.6
1.9
1.5
3.0
1.7
1.1
2.0
0.6
0.9
4.2
2.7
1.2
1.7
2.0
2.8
:
2.7
:

2008
3.8
2.8
0.2
1.3
5.0
1.6
2.9
5.2
2.8
0.3
3.2
2.2
2.6
3.0
1.1
1.2
1.4
3.0
0.9
1.1
1.4
0.6
0.7
4.2
2.2
0.7
1.7
2.3
2.8
1.5
2.7
:

2009
3.6
2.7
0.2
2.0
5.2
1.8
2.4
4.7
2.6
0.4
3.1
2.2
2.8
2.8
1.3
1.4
1.1
2.9
0.8
1.3
1.8
1.5
1.3
4.7
2.6
1.5
1.0
2.0
2.6
1.7
2.5
:

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

TABLE 38 : Primary balance, general government (as a percentage of GDP, 1993-2014) ¹ ²

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
6.3
1.2
-0.6
4.1
3.0
2.1
0.8
4.2
-0.3
4.5
-3.6
3.5
2.0
-0.8
-0.8
-4.4
6.8
2.3
3.8
-3.8
4.8
-1.4
-1.5
-0.2
-0.8
0.2
4.6
3.2
2.3
:
3.1
-4.7

1993-97
4.5
-0.9
:
4.0
2.5
-1.0
-1.3
3.9
:
2.6
:
2.6
-0.2
0.1
:
:
-0.6
0.5
:
:
3.9
:
:
:
:
:
-1.0
-2.0
:
:
1.4
0.0

2003-07
3.9
0.3
2.2
2.4
-1.5
2.9
-0.4
1.5
1.2
1.1
-0.9
1.5
0.8
-1.7
0.0
-0.7
5.0
0.9
2.8
-2.1
5.5
-0.2
-0.1
-3.1
-1.5
-0.6
3.3
-1.1
0.6
:
-0.8
:

2008
2.8
2.7
-2.7
-6.0
-4.8
-2.9
-0.4
2.5
3.8
3.5
-1.4
2.7
1.7
-0.6
-0.8
-0.8
5.8
0.9
2.6
-1.2
4.7
-3.6
-2.6
0.5
-1.5
-5.0
3.8
-2.8
0.4
0.1
-3.7
:

2009
-1.9
-0.4
-1.8
-11.9
-10.5
-9.4
-5.1
-0.8
-3.6
-0.4
-0.7
-3.4
-1.3
-7.3
-4.6
-6.6
-1.3
-3.5
-3.6
-4.5
-0.9
-8.3
-8.2
0.1
-4.8
-7.5
0.2
-9.5
-4.2
-2.4
-9.4
:

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

² Net lending/borrowing excluding interest expenditure.

166

Autumn 2012
forecast
2013
3.4
2.4
0.2
5.7
5.4
3.8
2.6
5.5
3.9
0.6
3.3
2.0
2.7
4.7
2.6
2.0
1.1
3.2
0.9
1.5
1.1
1.7
2.1
4.1
2.7
1.8
1.0
3.2
3.1
2.9
3.1
2.1

2012
3.5
2.4
0.1
4.0
5.4
3.0
2.6
5.5
3.5
0.5
3.2
2.0
2.6
4.5
2.4
1.8
1.1
3.1
0.8
1.5
1.6
1.6
2.0
4.1
2.7
1.9
1.0
3.2
3.0
2.7
2.9
2.1

Autumn 2012
forecast
2013
0.0
2.2
-0.3
-1.9
0.0
-2.2
-1.0
3.5
-1.8
-1.1
0.3
-0.8
0.0
0.2
-1.3
-1.3
-0.1
0.6
-0.6
-1.9
-0.9
0.2
-0.7
1.2
-0.4
-0.6
0.6
-3.9
-0.2
-1.3
-4.2
-5.8

2012
0.5
2.3
-1.0
-4.4
-1.4
-5.0
-1.9
2.6
-1.7
-1.4
0.6
-1.7
-0.5
-0.5
-2.0
-3.1
-0.7
-0.2
-0.6
-2.1
-2.4
-0.2
-1.1
1.6
-0.7
-1.0
1.0
-3.0
-0.6
-1.8
-5.5
-6.2

2014
3.4
2.3
0.2
5.6
6.0
4.0
2.5
5.8
4.2
0.7
3.2
2.0
2.7
5.0
2.8
2.1
1.1
3.3
0.9
1.6
1.1
2.0
2.0
4.2
2.7
1.7
1.0
3.2
3.1
3.3
3.3
2.1

2014
-0.1
2.2
0.5
0.7
1.5
-2.5
-1.0
3.7
-1.8
-1.0
0.6
-1.2
0.8
2.5
-1.4
-1.1
0.2
0.8
-0.1
-1.7
-0.6
0.7
-0.2
0.7
-0.2
-0.3
1.4
-2.7
0.2
-0.6
-2.9
-5.6

19.10.2012

Spring 2012
forecast

2012
3.3
2.6
0.1
4.0
6.3
3.2
2.6
5.4
3.2
0.5
3.3
2.1
2.7
4.8
2.5
1.9
1.2
3.2
0.8
1.4
1.5
1.7
2.1
4.1
2.7
1.7
1.1
3.4
3.1
0.0
2.8
2.1

2013
3.3
2.4
0.1
5.5
6.4
3.3
2.6
5.6
3.2
0.6
3.4
2.2
2.7
4.9
2.6
2.0
1.2
3.2
1.0
1.5
1.5
1.8
2.0
4.2
2.7
1.7
1.1
3.5
3.1
0.0
2.9
2.1

Spring 2012
forecast

2012
0.4
1.7
-2.2
-4.3
-1.0
-3.3
-1.9
3.4
-0.2
-1.2
0.8
-2.3
-0.3
0.1
-1.7
-2.8
0.5
0.0
-1.1
-1.4
-2.6
-0.4
-1.2
1.5
-0.3
-1.1
0.8
-3.3
-0.5
-5.1
-5.5
-6.1

2013
0.0
1.6
-1.1
-2.0
-2.0
-3.1
-1.6
4.5
0.7
-1.6
0.5
-2.5
0.8
1.9
-1.2
-2.9
0.8
0.3
-0.7
-1.1
-0.5
-0.3
-0.9
1.2
0.2
-0.4
1.2
-3.0
-0.2
-5.0
-4.2
-5.9

2010
3.4
2.5
0.1
3.2
5.8
1.9
2.4
4.6
2.2
0.4
3.0
2.0
2.7
2.9
1.6
1.3
1.1
2.8
0.6
1.4
1.7
1.4
1.8
4.1
2.7
1.5
0.8
3.0
2.7
2.0
2.6
:

2010
-0.4
-1.6
0.3
-27.7
-4.9
-7.7
-4.7
0.1
-3.0
-0.5
-0.6
-3.1
-1.8
-7.0
-4.1
-6.3
-1.4
-3.4
-2.5
-3.4
-0.8
-6.7
-5.4
-0.3
-5.2
-5.3
1.1
-7.2
-3.8
-3.0
-8.7
:

2011
3.3
2.6
0.1
3.3
7.1
2.5
2.6
5.0
2.4
0.5
3.1
2.0
2.6
4.0
1.9
1.6
1.1
3.0
0.6
1.4
1.8
1.5
1.8
4.1
2.7
1.6
1.0
3.2
2.9
2.3
2.8
2.1

2011
-0.4
1.8
1.3
-10.0
-2.3
-7.0
-2.6
1.0
-3.9
0.1
0.4
-2.4
0.1
-0.4
-4.5
-3.4
0.5
-1.1
-1.4
-1.9
-0.1
-2.0
-3.7
8.5
-2.3
-4.0
1.4
-4.6
-1.5
-2.9
-7.3
-5.7

TABLE 39 : Cyclically-adjusted net lending (+) or net borrowing (-), general government (as a percentage of GDP, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia

5-year
averages
1998-02
-0.6
-2.2
-0.9
0.7
-4.0
-1.9
-3.1
-3.0
-3.9
3.0
-7.8
-0.7
-1.8
-4.8
:
-7.5
3.1
-2.3
:
-3.9
0.3
-1.7
:
:
-4.3
-1.8
1.0
0.2
:
:

1993-97
-4.0
-4.1
:
-0.8
-8.6
-4.6
-4.0
-6.9
:
:
:
-2.4
-3.7
-4.6
:
:
-3.1
-4.5
:
:
-1.5
:
:
:
:
:
-4.2
-5.0
:
:

2003-07
-0.9
-2.2
0.0
0.8
-6.7
0.4
-4.2
-4.0
-2.1
0.3
-3.9
-0.6
-2.0
-4.2
-2.6
-2.8
2.8
-2.5
0.2
-3.9
2.4
-2.5
-2.7
-8.4
-4.3
-3.2
0.6
-4.2
-2.7
:

2008
-1.9
-1.2
-4.3
-7.5
-10.5
-4.7
-4.1
-3.5
-0.6
2.5
-5.1
-0.7
-1.9
-3.6
-4.8
-4.0
2.4
-3.0
0.0
-4.4
2.3
-6.4
-5.8
-4.8
-4.8
-8.8
1.9
-5.6
-3.3
:

2009
-4.5
-0.9
0.7
-12.1
-15.0
-9.4
-6.1
-3.6
-6.2
0.9
-3.0
-4.1
-2.8
-8.8
-4.4
-7.3
1.0
-4.6
-3.1
-5.4
0.4
-6.3
-6.6
-2.5
-7.7
-9.3
2.9
-9.8
-5.1
:

2010
-3.3
-3.5
1.9
-28.9
-8.4
-7.6
-5.9
-3.5
-5.3
0.0
-3.5
-4.0
-3.7
-9.1
-4.6
-7.6
-0.5
-5.1
-1.8
-4.7
0.0
-4.9
-4.9
-2.8
-8.0
-6.1
1.4
-8.9
-5.4
:

2011
-3.6
-0.9
1.0
-12.1
-5.1
-7.6
-4.3
-3.0
-6.1
0.2
-2.8
-3.5
-2.5
-3.2
-5.7
-4.9
0.3
-3.4
-1.3
-3.3
0.5
-1.9
-4.9
5.2
-5.0
-5.0
0.3
-6.7
-3.7
:

TABLE 40 : Cyclically-adjusted primary balance, general government (as a percentage of GDP, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia

5-year
averages
1998-02
6.0
1.0
-0.6
2.8
3.0
1.5
0.0
3.5
-0.6
3.4
-4.4
3.0
1.6
-1.9
:
-4.0
5.9
1.7
:
-2.9
4.0
-0.9
:
:
-1.1
2.0
4.6
2.9
:
:

1993-97
4.9
-0.8
:
4.3
2.5
0.3
-0.6
4.0
:
:
:
3.1
0.2
0.4
:
:
1.3
0.9
:
:
4.5
:
:
:
:
:
1.4
-1.7
:
:

2003-07
3.5
0.7
0.2
1.9
-2.0
2.3
-1.5
0.8
1.2
0.5
-0.4
1.8
0.8
-1.5
-1.0
-1.0
4.3
0.6
1.8
-2.8
4.4
-2.0
-1.8
-4.3
-1.6
-2.0
2.3
-2.2
0.1
:

2008
1.9
1.6
-4.1
-6.1
-5.5
-3.1
-1.1
1.7
2.2
2.9
-1.9
1.5
0.7
-0.6
-3.6
-2.7
3.8
0.1
0.9
-3.4
3.7
-5.8
-5.1
-0.6
-2.6
-8.1
3.6
-3.2
-0.5
:

2009
-0.9
1.7
0.9
-10.1
-9.8
-7.6
-3.7
1.1
-3.6
1.2
0.1
-1.9
0.0
-5.9
-3.1
-5.9
2.1
-1.7
-2.3
-4.2
2.1
-4.8
-5.3
2.2
-5.1
-7.7
3.9
-7.8
-2.5
:

2010
0.1
-1.0
2.0
-25.7
-2.6
-5.7
-3.5
1.1
-3.0
0.3
-0.5
-2.0
-1.1
-6.2
-2.9
-6.2
0.6
-2.3
-1.2
-3.3
1.7
-3.5
-3.1
1.3
-5.3
-4.5
2.2
-6.0
-2.7
:

2011
-0.3
1.6
1.1
-8.8
2.0
-5.2
-1.7
1.9
-3.8
0.7
0.3
-1.4
0.1
0.8
-3.8
-3.4
1.4
-0.4
-0.7
-2.0
2.2
-0.4
-3.1
9.3
-2.4
-3.4
1.4
-3.5
-0.8
:

Autumn 2012
forecast
2013
-2.7
0.3
-0.8
-7.3
0.7
-4.0
-2.0
-0.4
-4.8
-0.9
-2.9
-1.1
-2.3
-2.5
-2.0
-2.9
-0.1
-1.3
-0.9
-2.4
-0.6
-1.5
-2.3
-1.5
-2.0
-1.4
0.3
-5.6
-1.9
:

2012
-2.3
0.0
-1.4
-7.7
-1.2
-6.0
-3.3
-1.3
-4.4
-1.1
-2.5
-2.2
-2.9
-3.1
-3.0
-4.9
-0.6
-2.2
-0.8
-2.7
-1.8
-1.2
-2.6
-1.1
-2.9
-1.9
0.6
-4.6
-2.5
:

Autumn 2012
forecast
2013
0.8
2.7
-0.6
-1.6
6.2
-0.1
0.5
5.1
-0.9
-0.2
0.4
0.9
0.4
2.1
0.6
-1.0
0.9
1.9
0.0
-0.9
0.6
0.3
-0.2
2.5
0.7
0.4
1.3
-2.4
1.1
:

2012
1.1
2.5
-1.3
-3.7
4.2
-3.0
-0.7
4.2
-0.9
-0.6
0.7
-0.2
-0.3
1.4
-0.6
-3.1
0.5
0.9
0.1
-1.3
-0.3
0.4
-0.5
3.0
-0.2
0.0
1.6
-1.4
0.5
:

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
-2.2
-0.4
-1.8
-7.8
-2.6
-4.5
-3.1
-0.6
-2.7
-0.6
-2.5
-2.4
-2.7
-2.6
-2.2
-4.3
0.3
-2.0
-0.7
-2.1
-2.6
-1.2
-2.6
-1.3
-2.7
-1.7
0.3
-5.1
-2.4
:

2013
-2.6
-0.3
-1.0
-7.9
-4.5
-4.8
-2.9
0.1
-1.7
-1.4
-3.1
-2.5
-1.8
-1.3
-1.9
-4.6
0.3
-1.8
-0.8
-1.8
-1.0
-1.7
-2.6
-2.0
-1.9
-1.2
0.4
-5.1
-2.2
:

Spring 2012
forecast

2012
1.1
2.1
-1.7
-3.8
3.7
-1.4
-0.5
4.8
0.5
0.0
0.8
-0.3
0.0
2.2
0.3
-2.4
1.5
1.2
0.1
-0.7
-1.1
0.4
-0.5
2.8
0.0
0.0
1.4
-1.7
0.7
:

2013
0.7
2.0
-0.9
-2.4
1.9
-1.5
-0.2
5.6
1.6
-0.8
0.3
-0.3
0.9
3.7
0.7
-2.5
1.6
1.4
0.2
-0.3
0.4
0.1
-0.5
2.1
0.8
0.6
1.5
-1.6
0.9
:

2014
-3.1
0.3
-0.1
-5.3
0.4
-5.3
-2.2
-0.9
-5.3
-1.1
-2.6
-1.8
-1.8
-0.9
-2.7
-2.8
-0.3
-1.6
-0.6
-2.4
-0.6
-1.7
-2.1
-2.6
-1.7
-1.0
0.8
-4.8
-2.0
:

2014
0.3
2.5
0.1
0.3
6.4
-1.3
0.4
5.0
-1.1
-0.4
0.6
0.2
0.8
4.0
0.1
-0.8
0.9
1.7
0.3
-0.9
0.5
0.4
-0.1
1.6
1.0
0.7
1.8
-1.5
1.1
:

167

European Economic Forecast, Autumn 2012

TABLE 41 : Structural budget balance, general government (as a percentage of GDP, 1993-2014)
5-year
averages
1998-02
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia

2003-07
-1.1
-2.2
-0.1
0.9
-6.7
0.6
-4.4
-4.7
-2.9
0.3
-4.3
-0.6
-1.3
-5.1
-2.6
-2.6
2.8
-2.6
0.8
-3.5
2.4
-2.5
-2.6
-8.3
-4.3
-3.0
0.5
-4.3
-2.8
:

1993-97
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:
:

2009
-3.9
-0.9
-1.1
-10.1
-14.7
-8.7
-6.1
-4.3
-6.2
0.9
-3.7
-4.1
-2.8
-8.5
-4.3
-7.5
1.0
-4.6
-3.1
-5.8
0.4
-6.0
-7.0
-2.5
-8.0
-9.7
2.9
-9.5
-5.1
:

2008
-2.0
-0.9
-4.5
-7.5
-9.6
-4.4
-4.1
-3.7
-0.6
2.5
-5.4
-0.7
-1.9
-4.4
-4.8
-4.2
2.4
-2.9
0.0
-4.4
2.3
-6.4
-5.8
-4.4
-4.8
-8.4
1.6
-5.0
-3.1
:

2010
-3.3
-2.3
-1.2
-9.4
-8.7
-7.6
-5.7
-3.7
-5.3
0.0
-4.6
-3.9
-3.4
-8.4
-4.6
-7.4
-0.4
-4.4
-1.7
-4.8
0.0
-3.2
-4.9
-3.5
-8.0
-6.1
1.4
-8.9
-4.9
:

TABLE 42 : Gross debt, general government (as a percentage of GDP, 2005-2014)

2005
92.0
68.5
4.6
27.3
101.2
43.2
66.7
105.7
69.4
6.1
69.7
51.8
64.2
67.7
26.7
34.2
41.7
70.3
27.5
28.4
37.8
12.5
18.3
61.7
47.1
15.8
50.4
42.2
62.9
37.9

2006
88.0
68.0
4.4
24.6
107.5
39.7
64.0
106.3
64.7
6.7
64.0
47.4
62.3
69.4
26.4
30.5
39.6
68.7
21.6
28.3
32.1
10.7
17.9
65.9
47.7
12.4
45.3
43.3
61.7
34.9

2007
84.0
65.2
3.7
25.0
107.2
36.3
64.2
103.3
58.8
6.7
61.9
45.3
60.2
68.4
23.1
29.6
35.2
66.4
17.2
27.9
27.1
9.0
16.8
67.0
45.0
12.8
40.2
44.2
59.0
32.5

2008
89.2
66.8
4.5
44.5
112.9
40.2
68.2
106.1
48.9
14.4
62.0
58.5
63.8
71.7
22.0
27.9
33.9
70.2
13.7
28.7
33.4
19.8
15.5
73.0
47.1
13.4
38.8
52.3
62.2
28.8

2009
95.7
74.5
7.2
64.9
129.7
53.9
79.2
116.4
58.5
15.3
67.6
60.8
69.2
83.2
35.0
35.6
43.5
80.0
14.6
34.2
40.6
36.7
29.3
79.8
50.9
23.6
42.6
67.8
74.6
35.7

2010
95.5
82.5
6.7
92.2
148.3
61.5
82.3
119.2
61.3
19.2
68.3
63.1
72.0
93.5
38.6
41.0
48.6
85.6
16.2
37.8
42.9
44.5
37.9
81.8
54.8
30.5
39.5
79.4
80.2
42.2

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia

168

Autumn 2012
forecast
2013
-2.7
0.3
-0.4
-7.5
0.7
-4.0
-2.0
-0.4
-4.8
-0.9
-3.2
-1.1
-2.1
-2.5
-2.0
-3.2
-0.1
-1.3
-0.9
-2.6
-0.8
-1.5
-2.1
-1.5
-2.2
-1.4
0.3
-5.6
-2.0
:

2012
-2.7
0.2
-0.4
-7.9
-1.5
-6.3
-3.4
-1.4
-4.6
-1.1
-3.5
-2.2
-2.6
-4.1
-2.8
-5.1
-0.6
-2.2
-0.8
-2.5
-0.3
-1.2
-2.7
-2.0
-2.9
-1.9
0.6
-6.4
-2.7
:

Autumn 2012
forecast
2013
100.5
80.8
11.9
122.5
188.4
92.7
92.7
127.6
96.7
23.6
73.0
69.3
75.9
123.5
59.0
54.3
54.7
94.5
18.1
46.9
44.7
44.3
40.8
77.1
55.8
34.8
36.2
93.2
88.5
56.6

2012
99.9
81.7
10.5
117.6
176.7
86.1
90.0
126.5
89.7
21.3
72.3
68.8
74.6
119.1
54.0
51.7
53.1
92.9
19.5
45.1
45.4
41.9
41.6
78.4
55.5
34.6
37.4
88.7
86.8
53.8

2014
-3.1
0.3
0.2
-5.3
0.4
-5.3
-2.1
-0.8
-5.3
-1.1
-2.8
-1.8
-1.8
-0.9
-2.7
-2.8
-0.3
-1.5
-0.6
-2.4
-0.6
-1.7
-2.1
-2.6
-1.7
-1.0
0.7
-4.8
-2.0
:

2014
101.0
78.4
11.2
119.2
188.9
97.1
93.8
126.5
102.7
26.9
72.7
70.3
75.1
123.5
62.3
55.9
55.0
94.3
18.3
48.1
45.3
44.9
40.5
76.8
56.1
34.8
34.1
95.1
88.6
60.6

19.10.2012

Spring 2012
forecast

2012
-2.7
-0.4
-0.8
-8.1
-2.9
-4.8
-3.2
-0.7
-2.7
-0.6
-3.5
-2.4
-2.1
-3.0
-2.2
-4.4
0.3
-2.1
-0.7
-1.8
-1.7
-2.2
-2.9
-2.1
-2.8
-1.8
0.3
-6.9
-2.7
:

2013
-2.6
-0.3
-0.5
-7.9
-4.5
-4.8
-2.9
-0.1
-1.7
-1.4
-3.3
-2.5
-1.8
-1.3
-1.9
-4.6
0.3
-1.9
-0.8
-1.8
-1.0
-1.7
-2.1
-2.0
-1.9
-1.2
0.4
-5.1
-2.2
:

Spring 2012
forecast

2012
100.5
82.2
10.4
116.1
160.6
80.9
90.5
123.5
76.5
20.3
74.8
70.1
74.2
113.9
54.7
49.7
50.5
91.8
17.6
43.9
40.9
43.5
40.4
78.5
55.0
34.6
35.6
91.2
86.2
51.3

2013
100.8
80.7
11.7
120.2
168.0
87.0
92.5
121.8
78.1
21.6
75.2
73.0
74.3
117.1
58.1
53.5
51.7
92.6
18.5
44.9
42.1
44.7
40.9
78.0
53.7
34.6
34.2
94.6
87.2
57.1

2011
-3.4
-0.7
-0.7
-7.9
-5.4
-7.5
-4.5
-3.7
-5.9
0.2
-3.5
-3.4
-2.3
-6.2
-4.7
-5.4
0.3
-3.5
-1.3
-3.2
0.5
-1.7
-4.9
-4.3
-5.0
-3.9
0.3
-6.7
-3.8
:

2011
97.8
80.5
6.1
106.4
170.6
69.3
86.0
120.7
71.1
18.3
70.9
65.5
72.4
108.1
46.9
43.3
49.0
88.1
16.3
40.8
46.6
42.2
38.5
81.4
56.4
33.4
38.4
85.0
83.0
46.7

TABLE 43 : Gross national saving (as a percentage of GDP, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
25.9
20.5
22.1
22.5
12.7
22.4
20.7
21.1
16.5
33.4
14.1
26.6
23.7
18.5
24.5
23.0
27.2
21.5
15.0
25.3
22.3
17.6
13.0
19.3
19.1
14.9
22.6
15.7
20.7
16.2
16.9
27.2

1993-97
25.2
21.0
21.2
19.9
17.5
21.1
18.3
21.4
:
33.8
:
26.6
22.4
19.4
23.3
24.6
19.8
21.0
:
27.2
20.2
22.8
:
17.5
18.5
20.0
19.0
15.8
:
:
15.9
30.7

2003-07
25.6
23.2
22.6
22.9
11.0
22.2
19.7
20.4
13.2
31.9
11.4
27.5
25.5
14.1
25.7
20.0
25.8
21.8
14.3
23.8
24.4
19.0
15.6
15.9
17.7
16.5
25.6
15.1
20.7
21.8
14.5
26.4

2008
25.1
25.4
21.4
15.5
6.0
19.5
20.1
18.8
11.1
26.9
13.3
25.2
27.6
10.6
25.7
21.4
25.4
21.5
14.4
26.0
25.2
18.1
14.0
16.6
19.1
19.8
29.0
16.1
20.9
21.4
12.8
26.3

TABLE 44 : Gross saving, private sector (as a percentage of GDP, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
23.8
20.0
18.2
17.1
12.9
19.5
19.2
20.4
16.7
24.2
17.2
23.6
21.9
18.3
23.1
23.4
20.6
20.1
10.9
22.5
19.6
16.7
12.0
18.6
19.1
14.8
18.8
13.9
19.1
:
15.1
27.4

1993-97
27.5
20.9
:
19.1
22.9
22.3
19.4
25.0
:
:
:
26.5
22.1
20.6
:
:
21.0
22.1
:
:
20.4
:
:
:
:
:
21.8
18.6
:
:
16.8
26.8

2003-07
24.1
23.2
16.5
18.2
14.1
16.8
19.3
20.2
11.8
25.7
12.8
25.1
23.9
16.1
23.0
19.6
20.0
20.8
9.1
20.5
19.5
15.3
13.0
18.3
17.7
12.9
21.2
15.9
19.8
:
15.5
27.4

2008
24.2
23.0
18.2
16.9
12.6
18.8
19.4
17.9
6.3
19.4
15.3
21.1
25.3
11.9
22.1
20.4
18.6
20.1
8.1
22.8
19.8
17.6
13.0
16.8
17.8
18.6
23.6
17.8
19.7
:
16.2
26.4

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

2009
20.5
22.5
22.0
11.9
4.2
19.2
17.2
16.9
8.6
23.7
9.1
21.6
23.6
9.4
21.7
17.1
20.5
18.9
20.4
20.6
20.9
29.1
13.5
17.9
17.3
21.2
23.4
12.9
18.2
19.8
10.5
22.6

2009
23.5
22.9
20.0
19.5
16.0
24.5
20.6
18.9
9.3
19.3
10.9
22.3
24.2
16.4
22.2
20.8
20.3
21.5
20.8
21.4
21.5
34.1
20.1
19.5
19.0
24.2
20.8
19.6
21.2
:
18.7
28.4

2010
23.6
23.6
23.3
13.1
4.8
18.4
17.3
16.7
10.6
27.6
11.6
23.1
25.1
9.9
20.6
20.1
20.1
19.5
22.5
19.7
22.7
22.8
17.4
19.9
17.2
20.9
25.5
12.6
18.7
20.6
11.6
23.5

2010
25.5
24.3
21.2
20.5
13.7
23.0
20.7
18.2
10.7
23.2
13.5
23.6
25.5
16.8
21.3
24.7
20.4
21.8
22.2
20.3
23.1
25.0
22.2
22.3
20.0
21.8
22.0
19.2
21.4
21.6
19.8
28.9

2011
22.8
23.9
25.8
12.0
4.4
17.8
18.1
16.4
12.3
28.2
12.2
26.4
24.6
10.9
20.3
21.5
19.7
19.9
24.8
20.7
24.1
24.5
16.8
20.5
17.4
24.7
26.1
13.2
19.2
20.2
11.6
21.9

2011
24.4
22.4
22.4
18.7
12.8
23.0
19.7
17.8
14.1
23.7
13.5
27.0
23.7
15.7
21.2
23.7
18.2
21.0
24.4
20.3
23.4
22.7
19.7
22.9
17.9
23.2
22.5
18.2
20.7
21.7
18.9
27.0

Autumn 2012
forecast
2013
22.6
22.5
25.8
13.8
7.9
18.2
18.2
17.0
8.4
26.6
13.6
26.6
24.5
13.4
19.5
23.8
19.1
19.9
22.2
21.4
22.9
25.0
17.7
20.3
17.2
25.8
26.1
13.0
19.1
20.1
12.8
22.1

2012
22.4
23.2
25.9
12.7
5.7
17.4
18.0
16.4
7.3
26.1
13.3
26.3
24.5
12.8
19.4
23.3
19.0
19.7
22.4
20.7
23.2
24.7
17.2
19.7
17.4
25.4
25.8
11.2
18.8
19.3
12.1
21.7

Autumn 2012
forecast
2013
24.0
20.8
22.0
20.3
11.8
22.4
18.4
16.6
10.9
23.3
15.3
25.8
23.6
16.4
19.7
24.8
17.9
20.0
20.8
21.1
22.7
22.4
17.3
20.5
17.0
21.6
23.1
18.1
19.8
21.3
17.9
27.3

2012
23.3
21.2
21.9
19.2
11.1
22.4
19.1
16.7
9.1
22.7
15.1
26.3
23.7
16.9
20.5
25.1
18.1
20.3
21.1
20.5
23.2
21.9
17.5
19.8
16.8
21.7
22.4
17.0
19.8
20.6
18.3
27.3

2014
22.9
22.4
26.8
15.1
9.8
19.0
18.3
17.5
8.2
26.5
14.1
26.7
25.3
13.9
19.1
25.0
18.9
20.2
22.1
22.2
22.7
25.2
18.0
20.1
16.6
26.1
26.5
14.4
19.6
20.5
13.6
23.0

2014
24.5
20.5
23.0
19.0
12.5
23.7
18.6
17.2
10.9
23.1
15.4
26.4
23.9
15.2
19.3
25.8
17.4
20.3
20.1
21.7
22.6
22.7
16.9
20.4
16.8
21.6
22.7
18.5
20.1
21.4
17.7
28.1

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
22.9
22.6
24.9
11.6
6.5
18.8
18.1
16.4
8.9
26.1
9.4
26.1
26.1
12.3
20.5
22.5
20.5
19.8
23.5
20.7
23.0
25.0
17.6
20.7
17.7
25.1
25.1
12.9
19.0
20.5
12.6
21.6

2013
23.0
22.9
25.6
13.1
9.2
19.4
18.4
17.5
9.2
26.4
10.5
26.3
26.4
13.5
21.5
23.1
20.7
20.3
23.1
20.7
23.0
25.6
18.6
21.7
17.2
25.7
25.3
13.8
19.6
20.7
13.2
22.9

Spring 2012
forecast

2012
23.8
21.4
21.9
17.5
12.7
22.8
19.1
15.8
7.7
22.7
10.2
26.7
25.3
15.8
21.5
24.3
19.0
20.3
23.3
19.7
23.6
22.6
18.5
20.8
16.3
21.5
22.0
18.1
20.0
21.9
18.0
26.8

2013
24.5
21.6
22.3
18.6
16.4
23.5
19.0
16.2
7.3
23.4
11.9
27.2
25.2
15.6
22.2
25.3
18.7
20.6
22.6
19.2
22.9
23.8
18.8
21.9
15.8
21.5
21.9
18.0
20.2
22.0
17.5
28.0

169

European Economic Forecast, Autumn 2012

TABLE 45 : Saving rate of households (1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
17.4
15.5
2.9
:
6.2
11.5
14.8
15.8
10.5
:
:
14.3
13.5
10.5
14.5
10.4
8.3
:
:
10.3
6.5
-1.7
5.2
12.6
12.8
-2.4
6.8
5.2
:
:
7.6
14.0

1993-97
19.7
16.6
8.2
:
:
:
15.1
22.3
:
:
:
18.3
:
:
:
:
10.3
:
:
10.2
6.8
1.7
:
:
:
:
8.5
8.9
:
:
9.4
18.7

2003-07
15.8
16.3
-3.7
8.1
3.7
10.9
14.9
16.1
9.9
:
:
12.7
14.7
9.1
16.1
6.4
8.2
14.3
:
9.5
5.9
-0.3
0.2
9.9
8.4
-10.8
8.2
3.1
11.4
:
7.2
8.7

2008
16.6
17.4
1.9
11.1
0.8
13.7
15.3
15.2
4.9
12.0
:
12.2
16.3
7.1
15.4
6.1
7.8
14.8
-20.9
9.4
5.1
4.9
-3.0
8.0
2.4
-1.1
11.8
2.2
11.3
:
9.9
7.6

2009
18.3
17.0
11.4
14.7
3.3
17.8
16.1
14.2
11.4
13.5
:
12.3
16.1
10.9
14.9
6.9
11.7
15.5
-3.0
11.2
8.2
10.3
4.3
10.2
9.0
-1.3
13.8
6.6
13.4
:
9.4
9.1

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

TABLE 46 : Gross saving, general government (as a percentage of GDP, 1993-2014) ¹

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
2.1
0.4
3.8
5.4
-0.1
2.9
1.5
0.7
-0.1
9.1
-3.1
3.0
1.8
0.2
1.4
-0.4
6.7
1.4
4.1
2.8
2.7
0.9
1.0
0.7
0.0
0.2
3.9
1.8
1.6
:
1.9
-0.2

1993-97
-2.2
0.2
:
0.9
-5.4
-1.2
-1.1
-3.7
:
:
:
0.1
0.3
-1.2
:
:
-1.2
-1.2
:
:
-0.2
:
:
:
:
:
-2.8
-2.9
:
:
-1.0
3.9

2003-07
1.5
-0.1
6.1
4.7
-3.2
5.4
0.3
0.2
1.4
6.2
-1.4
2.3
1.6
-2.0
2.8
0.4
5.8
1.1
5.2
3.3
4.9
3.7
2.6
-2.4
-0.1
3.6
4.4
-0.8
0.9
:
-1.0
-1.0

2008
0.9
2.4
3.2
-1.4
-6.5
0.7
0.6
0.8
4.9
7.5
-2.0
4.1
2.3
-1.3
3.6
1.0
6.7
1.4
6.3
3.2
5.5
0.5
1.0
-0.2
1.3
1.2
5.4
-1.7
1.1
:
-3.4
-0.1

2009
-3.0
-0.4
2.0
-7.7
-11.8
-5.3
-3.4
-2.0
-0.7
4.4
-1.8
-0.7
-0.6
-6.9
-0.4
-3.7
0.2
-2.6
-0.4
-0.9
-0.7
-4.9
-6.6
-1.6
-1.8
-3.0
2.5
-6.7
-2.9
:
-8.2
-5.8

¹ ESA 79 up to 1994, ESA 95 from 1995 onwards.

170

Autumn 2012
forecast
2013
14.9
16.3
2.8
16.7
3.2
8.1
15.4
12.4
7.3
:
:
12.8
12.5
9.7
10.2
7.6
8.2
13.5
:
10.3
6.7
0.2
:
:
1.8
:
14.7
6.1
11.8
:
7.8
10.2

2012
14.8
16.5
4.4
17.2
1.4
8.7
15.5
12.4
5.2
:
:
12.5
12.6
9.9
10.9
9.0
8.1
13.6
:
10.7
7.5
-0.5
:
:
1.4
:
14.0
6.1
11.9
:
8.2
8.2

Autumn 2012
forecast
2013
-1.5
1.7
3.8
-6.4
-3.9
-4.2
-0.2
0.4
-2.5
3.3
-1.7
0.8
0.9
-3.0
-0.2
-1.0
1.2
-0.1
1.4
0.2
0.2
2.6
0.4
-0.1
0.2
4.1
3.1
-5.1
-0.7
-1.2
-5.1
-5.2

2012
-0.9
2.0
4.0
-6.5
-5.4
-5.0
-1.1
-0.3
-1.8
3.4
-1.8
0.0
0.8
-4.1
-1.0
-1.8
0.9
-0.6
1.3
0.2
0.0
2.8
-0.4
-0.1
0.6
3.7
3.3
-5.8
-1.1
-1.3
-6.2
-5.6

2014
14.5
16.0
1.6
16.0
5.2
9.1
15.3
12.4
7.5
:
:
13.4
12.7
9.9
9.7
7.7
8.3
13.8
:
10.1
6.9
0.1
:
:
2.2
:
14.4
5.8
11.9
:
7.4
10.7

2014
-1.6
1.9
3.8
-3.9
-2.7
-4.6
-0.3
0.3
-2.7
3.3
-1.3
0.3
1.4
-1.3
-0.1
-0.9
1.5
-0.1
2.0
0.5
0.0
2.5
1.1
-0.3
-0.2
4.5
3.8
-4.1
-0.5
-0.9
-4.1
-5.0

19.10.2012

Spring 2012
forecast

2012
16.2
16.7
4.8
10.5
-6.3
10.7
16.4
11.1
4.5
:
:
13.0
12.9
8.2
13.9
11.0
7.5
13.6
:
8.9
7.0
0.7
:
:
2.0
:
13.2
7.4
12.1
:
8.9
11.3

2013
16.1
16.7
3.8
11.1
-4.7
11.1
16.3
11.3
3.3
:
:
13.1
12.5
8.3
14.1
11.4
7.0
13.7
:
8.7
6.4
1.6
:
:
2.9
:
13.5
7.3
12.2
:
8.7
12.1

Spring 2012
forecast

2012
-0.9
1.3
3.0
-6.0
-6.2
-4.0
-1.0
0.7
1.2
3.5
-0.8
-0.6
0.8
-3.4
-1.0
-1.8
1.5
-0.5
0.2
1.0
-0.6
2.4
-0.9
-0.1
1.4
3.6
3.1
-5.2
-1.0
-1.4
-5.4
-5.2

2013
-1.4
1.3
3.4
-5.5
-7.2
-4.0
-0.6
1.3
1.9
3.0
-1.4
-0.9
1.2
-2.1
-0.7
-2.2
1.9
-0.3
0.5
1.5
0.1
1.8
-0.2
-0.2
1.4
4.2
3.5
-4.3
-0.6
-1.3
-4.3
-5.1

2010
15.4
16.9
6.7
13.4
-2.7
13.1
15.6
12.7
11.6
:
:
10.5
14.2
10.2
13.5
10.7
10.6
14.1
-3.7
11.3
8.0
4.2
1.2
10.8
8.5
-2.5
11.3
6.6
12.6
:
9.6
8.9

2010
-1.9
-0.7
2.1
-7.4
-8.9
-4.6
-3.4
-1.5
-0.1
4.4
-1.9
-0.6
-0.4
-6.9
-0.7
-4.6
-0.3
-2.3
0.3
-0.6
-0.4
-2.2
-4.9
-2.5
-2.8
-0.9
3.4
-6.7
-2.7
-1.1
-8.2
-5.4

2011
14.4
16.5
5.6
14.1
-4.1
11.0
15.7
12.0
4.1
:
:
11.6
12.6
10.0
11.9
9.8
8.6
13.6
:
9.6
7.7
-1.1
:
10.4
2.8
:
12.9
6.0
11.9
:
8.6
7.4

2011
-1.6
1.5
3.4
-6.6
-8.4
-5.2
-1.6
-1.4
-1.9
4.5
-1.3
-0.7
0.9
-4.8
-0.9
-2.3
1.5
-1.2
0.4
0.3
0.6
1.8
-2.9
-2.4
-0.5
1.5
3.6
-5.1
-1.5
-1.6
-7.4
-5.1

TABLE 47 : Exports of goods and services, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
4.9
7.4
8.0
14.4
5.4
6.3
5.8
2.4
4.4
8.8
4.6
6.3
7.6
5.1
7.0
10.7
8.4
6.3
2.7
9.6
7.1
4.3
6.6
11.7
8.2
12.3
5.9
4.0
6.1
5.6
1.4
2.3

1993-97
5.3
5.1
:
14.9
6.0
11.8
6.5
7.5
:
6.1
:
7.4
5.3
7.8
5.4
4.6
11.6
7.1
:
10.8
4.3
:
:
15.2
12.5
12.7
10.2
8.0
8.4
:
8.4
5.0

2003-07
4.2
8.3
10.0
5.2
6.7
4.7
2.7
4.6
3.9
8.8
5.4
5.8
7.1
5.4
10.4
13.6
6.6
5.9
10.3
11.5
4.3
10.2
8.9
13.2
11.9
9.8
7.2
5.1
6.2
6.0
7.2
9.6

2008
2.1
2.8
1.0
-1.1
1.7
-1.0
-0.3
-2.8
-0.5
4.4
0.6
2.0
1.4
-0.1
4.0
3.1
5.8
1.1
3.0
4.0
3.3
2.0
11.4
5.7
7.1
8.3
1.7
1.2
1.6
1.7
6.1
1.4

2009
-11.1
-12.8
-20.6
-3.8
-19.4
-10.0
-12.1
-17.5
-10.7
-10.9
-9.3
-7.7
-15.6
-10.9
-16.7
-16.3
-21.3
-12.4
-11.2
-8.9
-9.8
-14.1
-12.6
-10.2
-6.8
-6.4
-13.8
-8.2
-11.6
-16.2
-9.1
-24.2

2010
9.6
13.7
22.9
6.2
5.2
11.3
9.6
11.4
3.8
7.7
18.5
11.2
8.7
8.8
10.1
16.0
7.5
11.2
14.7
15.5
3.2
11.6
17.4
14.2
12.1
14.0
11.4
6.4
10.7
5.2
11.1
24.3

TABLE 48 : Imports of goods and services, volume (percentage change on preceding year, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 Croatia
 USA
 Japan

5-year
averages
1998-02
4.2
5.6
8.6
13.9
7.6
9.4
7.3
5.0
4.5
8.7
2.2
6.5
5.1
5.9
6.5
8.9
6.7
6.5
10.7
8.9
6.8
6.9
6.4
12.9
6.1
13.5
4.9
7.4
6.7
3.6
7.2
1.6

1993-97
4.9
4.3
:
13.7
6.3
7.7
4.5
2.7
:
6.8
:
7.3
4.4
6.8
10.9
6.0
8.2
5.0
:
15.9
6.2
:
:
16.3
19.5
10.0
6.6
6.8
6.7
:
10.1
6.6

2003-07
4.4
7.4
12.9
6.1
6.4
8.3
4.6
4.7
6.7
9.0
7.0
5.5
6.6
4.4
11.0
11.0
7.4
6.2
14.7
9.3
6.9
16.0
13.0
11.6
12.1
20.8
7.1
4.9
6.5
7.1
6.0
4.6

2008
3.5
3.4
-7.0
-3.0
0.9
-5.2
0.9
-3.0
8.5
6.1
0.2
2.3
0.0
2.3
3.7
3.1
7.5
0.9
4.2
2.7
3.3
-10.8
10.3
5.5
8.0
7.9
3.5
-1.8
1.1
4.0
-2.7
0.3

2009
-10.6
-8.0
-32.0
-9.7
-20.2
-17.2
-9.6
-13.4
-18.6
-14.1
-10.1
-7.1
-13.3
-10.0
-19.5
-18.9
-17.2
-11.1
-21.0
-9.9
-11.6
-33.3
-28.1
-14.8
-12.4
-20.5
-14.3
-11.0
-11.6
-21.4
-13.5
-15.7

2010
8.9
11.1
21.0
3.6
-6.2
9.2
8.9
12.5
4.8
12.1
13.8
10.2
8.8
5.4
7.9
14.9
6.9
9.6
2.4
15.8
3.5
11.4
18.0
12.7
13.9
11.9
12.0
8.0
9.6
-1.4
12.5
11.2

Autumn 2012
forecast
2013
1.9
4.2
4.8
3.2
2.7
4.2
2.1
3.0
0.8
0.9
4.0
2.5
3.9
2.7
3.0
4.3
0.7
3.2
3.4
3.9
3.8
4.8
5.3
4.5
4.1
3.9
3.1
3.9
3.4
1.5
6.2
0.7

2012
-0.7
3.9
4.3
2.8
0.8
2.1
2.6
1.1
-0.9
-4.2
5.4
3.8
1.5
4.3
1.2
7.8
-2.7
2.5
1.7
3.9
2.5
5.1
5.0
2.0
3.0
0.2
0.5
0.2
2.2
-1.0
4.4
2.5

Autumn 2012
forecast
2013
1.6
5.1
3.6
2.0
-6.0
-3.2
0.9
1.4
-5.5
1.1
4.0
1.7
3.4
-1.1
2.0
3.5
0.3
2.1
5.3
3.4
6.1
5.5
5.3
3.9
2.1
5.2
2.7
2.8
2.4
2.0
5.3
-0.4

2012
-0.9
2.7
6.7
0.3
-10.0
-6.3
0.8
-7.2
-9.3
-3.8
3.1
2.9
1.1
-6.6
-3.2
3.2
-1.7
-0.5
4.6
1.1
3.3
5.3
4.1
0.6
-0.2
0.5
0.2
2.6
0.1
-2.5
3.8
6.3

2014
3.9
6.6
6.8
4.2
4.8
5.7
4.2
4.1
1.3
3.1
4.8
4.7
5.9
4.8
5.4
6.5
1.5
5.2
4.4
6.2
4.0
6.9
6.9
6.5
6.3
5.9
5.6
5.7
5.3
3.3
6.3
3.9

2014
3.6
7.2
6.8
3.2
-0.5
2.4
4.0
5.0
-0.4
3.5
4.9
4.5
5.6
3.3
5.0
5.7
1.8
5.0
5.7
5.6
4.7
7.3
7.6
6.2
5.2
6.6
6.0
3.8
4.9
4.0
7.6
1.0

2011
5.5
7.8
23.4
5.1
0.3
7.6
5.3
6.0
3.3
5.5
2.5
3.9
7.2
7.7
7.0
12.7
2.6
6.3
12.8
9.4
7.0
12.7
14.1
6.3
7.7
9.9
7.1
4.5
6.4
2.0
6.7
-0.1

2011
5.6
7.4
25.0
-0.3
-7.3
-0.9
4.9
0.6
-4.1
8.6
0.1
3.6
7.2
-5.2
5.2
10.1
5.7
4.2
8.5
6.7
5.2
22.7
13.7
5.0
5.5
10.5
6.3
0.5
4.1
1.2
4.8
6.3

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
0.8
2.9
1.4
3.2
3.2
3.2
2.5
1.1
1.4
0.1
2.4
0.4
2.8
2.5
2.2
3.1
1.9
2.1
3.3
3.6
3.2
4.5
4.3
5.4
3.4
2.9
1.3
3.1
2.4
-1.5
4.9
2.4

2013
4.2
5.0
5.6
4.2
5.4
4.7
4.8
4.0
2.3
4.2
4.4
3.8
5.1
4.7
5.1
6.1
4.8
4.6
5.2
5.7
4.9
6.3
6.0
8.0
5.7
5.8
5.4
4.7
4.8
2.5
6.6
4.8

Spring 2012
forecast

2012
1.1
3.8
2.3
1.2
-5.1
-5.6
1.3
-4.1
-2.2
0.7
2.0
-0.8
2.2
-6.9
0.4
2.7
2.3
0.4
2.7
2.5
5.0
5.1
4.5
4.0
1.7
4.0
2.2
1.3
0.9
-2.1
3.7
4.1

2013
4.1
6.0
5.9
3.0
0.0
-0.9
4.3
2.3
2.3
4.8
4.0
3.3
4.9
1.9
4.1
5.5
3.9
3.9
5.6
5.1
5.4
7.5
6.2
7.4
4.9
7.4
5.2
1.8
3.9
4.1
5.4
3.6

171

European Economic Forecast, Autumn 2012

TABLE 49 : Merchandise trade balance (fob-fob, as a percentage of GDP, 1993-2014)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Euro area, adjusted  ¹
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 EU, adjusted  ¹
 Croatia
 USA
 Japan

5-year
averages
1998-02
3.3
4.1
-15.2
25.3
-16.8
-5.1
0.6
1.7
-25.6
-12.2
-15.1
5.5
-1.5
-11.0
-3.9
-8.4
9.7
1.5
:
-8.2
-3.2
4.0
-15.2
-10.9
-4.6
-5.9
-5.6
6.9
-3.5
0.6
:
-16.9
-4.1
2.4

1993-97
3.3
2.6
-16.9
17.9
-11.8
-2.7
1.1
3.4
:
-10.0
-22.4
5.4
-3.8
-9.0
-3.2
-5.9
8.5
1.6
:
-0.5
-5.6
4.0
-9.2
-8.6
-5.7
-1.4
-5.4
6.2
-1.7
0.3
:
:
-2.3
2.5

2003-07
2.7
7.0
-15.9
17.1
-18.2
-7.2
-1.0
0.2
-26.4
-9.8
-16.5
7.4
-0.2
-10.3
-3.7
-3.7
5.8
1.2
:
-19.3
0.6
2.5
-21.4
-12.0
-2.9
-2.4
-10.5
6.0
-5.4
-0.1
:
-21.4
-5.9
2.3

2008
-1.5
7.3
-12.5
13.3
-20.9
-7.8
-2.7
-0.1
-32.4
-11.5
-21.1
7.3
-0.3
-12.9
-6.5
-1.6
3.7
0.2
-0.2
-24.3
0.6
0.2
-17.8
-13.0
-1.2
-4.9
-13.6
3.7
-6.5
-1.1
-1.8
-22.8
-6.0
0.8

¹ See note 7 on concepts and sources.

TABLE 50 : Current-account balance (as a percentage of GDP, 1993-2014)

5-year
averages
1998-02
4.8
-0.4
-7.1
-0.1
-8.9
-3.2
1.7
0.5
-1.2
10.0
-4.6
4.9
-0.3
-9.3
-1.5
-6.2
7.3
0.3
:
-3.5
-3.5
1.6
-7.5
-7.6
-6.8
-3.8
-4.4
4.7
-2.1
-0.2
:
-5.0
-2.7
2.6

1993-97
4.7
-0.9
-6.6
3.0
-0.9
-0.6
1.1
2.0
:
11.9
:
5.3
-2.5
-5.4
1.0
-3.0
2.4
0.7
:
-2.1
-2.8
1.5
2.4
:
-5.0
-0.1
:
2.6
-1.0
0.3
:
:
-2.4
2.3

2003-07
4.1
5.1
-12.9
-2.3
-13.0
-7.3
-0.4
-1.0
-6.6
10.4
-6.4
7.9
2.7
-9.2
-2.4
-7.1
4.7
0.6
:
-13.3
-3.8
3.0
-15.7
-9.3
-8.2
-3.1
-8.8
7.4
-2.2
0.0
:
-6.0
-4.9
3.8

2008
1.1
6.2
-8.5
-5.7
-18.0
-9.6
-1.9
-2.9
-12.2
5.4
-5.0
4.7
4.8
-12.6
-6.1
-6.3
3.1
-0.7
-1.6
-23.2
-2.9
2.9
-13.1
-13.0
-6.9
-4.8
-11.4
8.8
-1.0
-0.9
-2.1
-9.0
-4.8
3.3

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Euro area, adjusted  ¹
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 EU, adjusted  ¹
 Croatia
 USA
 Japan

¹ See note 7 on concepts and sources.

172

2009
-0.4
5.6
-4.4
20.1
-16.1
-4.0
-2.2
0.1
-25.5
-9.0
-18.5
6.3
-1.1
-10.0
-1.5
1.1
1.8
0.6
0.4
-12.0
2.3
2.5
-7.1
-3.3
2.5
-1.0
-5.8
3.1
-5.9
-0.3
-0.7
-16.6
-3.8
0.9

2009
0.7
6.0
4.2
-2.3
-14.4
-4.8
-1.8
-2.0
-10.7
7.2
-7.4
3.2
2.7
-10.8
-0.4
-2.5
2.0
0.1
-0.2
-9.0
-3.3
3.3
8.6
2.1
-0.1
-3.1
-4.2
6.9
-1.3
-0.1
-0.7
-5.2
-3.6
2.8

2010
-0.7
6.3
-2.7
22.8
-14.3
-4.6
-2.5
-1.3
-26.8
-9.2
-18.0
7.5
-1.1
-10.0
-2.9
0.8
1.4
0.6
0.2
-7.7
1.4
2.8
-7.0
-4.9
3.2
-1.8
-4.8
2.6
-6.7
-0.4
-1.0
-13.3
-4.6
1.7

2010
3.0
6.1
3.2
1.1
-12.8
-4.4
-2.0
-3.5
-9.2
8.2
-5.0
5.1
3.5
-9.7
-0.4
-2.5
1.6
0.3
-0.1
-0.4
-5.2
5.5
2.9
-0.4
1.2
-3.8
-3.9
6.8
-2.5
-0.1
-0.6
-1.1
-3.3
3.6

2011
-0.8
6.0
-3.8
23.0
-14.0
-3.8
-3.5
-1.1
-24.2
-11.3
-15.5
8.1
-2.3
-7.2
-3.0
1.1
-0.6
0.5
0.1
-5.1
2.3
2.9
-10.8
-5.9
3.3
-2.1
-5.5
2.6
-6.6
-0.5
-1.1
-14.2
-5.0
-0.4

2011
1.0
5.6
0.3
1.1
-11.7
-3.7
-2.6
-3.3
-4.2
7.1
-0.3
8.3
1.1
-6.6
0.1
-2.5
-1.1
0.3
0.0
1.7
-3.9
6.6
-2.4
-3.7
1.0
-4.5
-4.1
6.5
-1.9
0.0
-0.5
-0.9
-3.3
2.0

Autumn 2012
forecast
2013
-1.0
5.7
-5.7
24.7
-11.5
-0.8
-3.1
1.6
-20.6
-13.8
-15.6
9.1
-2.0
-2.3
-0.8
5.4
-0.9
1.6
1.2
-10.9
3.8
1.4
-12.1
-6.3
5.2
-1.2
-5.8
2.6
-6.9
0.2
-0.4
-14.8
-4.7
-1.4

2012
-1.1
6.3
-6.6
23.8
-12.7
-2.5
-3.3
0.8
-21.9
-13.6
-15.2
8.8
-2.1
-3.5
-1.0
4.8
-0.5
1.3
0.9
-9.1
3.2
2.1
-11.5
-5.8
3.9
-1.8
-5.4
2.4
-7.0
-0.1
-0.7
-14.6
-4.9
-1.5

Autumn 2012
forecast
2013
0.9
5.0
0.1
3.4
-6.3
-0.5
-1.8
-0.4
-3.5
4.9
1.8
9.8
1.2
-1.8
2.7
1.4
-1.6
1.5
1.2
-2.1
-2.1
4.6
-3.1
-3.0
2.6
-3.3
-4.2
6.5
-2.2
0.9
0.4
-1.5
-2.9
1.1

2012
0.7
5.7
-0.9
2.3
-8.3
-2.4
-2.2
-1.2
-6.3
4.4
2.1
9.2
1.1
-3.0
2.0
1.4
-1.6
1.1
0.9
-1.6
-2.9
5.6
-2.9
-2.9
1.6
-3.9
-4.1
6.4
-3.8
0.4
-0.2
-1.2
-3.1
0.9

2014
-1.2
5.6
-6.0
25.3
-10.8
0.0
-3.4
1.8
-20.7
-14.3
-15.9
9.0
-1.8
-1.6
-0.9
6.1
-1.3
1.7
1.3
-12.3
4.2
0.9
-12.6
-7.1
6.2
-1.4
-5.9
2.6
-6.5
0.3
-0.3
-15.2
-5.1
-1.2

2014
1.2
4.7
0.4
4.4
-5.2
0.4
-1.9
-0.3
-3.0
4.7
1.6
9.8
1.6
-1.5
2.3
2.2
-2.0
1.6
1.3
-2.5
-1.3
4.2
-3.5
-3.6
2.6
-3.7
-4.4
6.5
-1.1
1.1
0.6
-2.2
-2.9
1.3

19.10.2012

Spring 2012
forecast

2012
-3.9
5.6
-4.1
24.5
-12.3
-2.1
-3.5
-0.1
-24.1
-13.9
-15.8
7.6
-2.6
-4.2
-3.7
3.3
-0.7
0.7
0.4
-4.8
2.8
2.1
-10.6
-5.5
5.9
-1.7
-6.4
2.2
-5.9
-0.3
-0.8
-14.1
-5.2
0.1

2013
-4.0
5.4
-4.1
25.4
-12.1
-1.1
-3.5
0.9
-24.4
-13.6
-15.5
8.1
-2.8
-3.4
-2.7
3.9
-0.9
1.0
0.7
-5.5
3.1
2.0
-11.5
-5.8
7.2
-1.7
-6.2
2.3
-5.0
0.1
-0.4
-14.7
-5.2
0.1

Spring 2012
forecast

2012
1.5
4.7
-0.3
1.6
-7.8
-2.0
-2.4
-2.2
-7.7
4.5
-3.2
8.0
1.9
-3.6
-0.4
0.2
-0.6
0.6
0.1
0.6
-3.2
5.2
-1.8
-2.0
2.2
-3.9
-5.0
5.8
-1.7
0.3
-0.4
-1.3
-3.1
1.7

2013
1.6
4.5
-0.3
3.1
-6.3
-1.0
-2.1
-1.3
-7.2
4.9
-2.8
8.4
1.9
-2.9
0.7
0.2
-0.7
1.0
0.6
-0.3
-3.2
4.9
-2.6
-2.1
3.7
-4.2
-5.0
5.9
-1.0
0.7
0.0
-2.1
-3.0
1.6

TABLE 51 : Net lending (+) or net borrowing (-) of the nation (as a percentage of GDP, 1993-2014)
5-year
averages
1998-02
4.7
-0.3
-6.7
0.7
-7.3
-2.2
1.7
0.7
-1.1
:
-4.2
4.7
-0.5
-7.3
-1.6
-6.6
7.4
0.5
:
-3.4
-3.2
1.8
-7.2
-7.6
-6.7
-3.7
-4.1
4.4
-2.0
-0.7
:
-4.5
-2.7
2.4

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Euro area, adjusted  ¹
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 EU, adjusted  ¹
 Croatia
 USA
 Japan

2003-07
4.0
5.1
-11.8
-2.2
-11.3
-6.5
-0.5
-0.8
-6.2
10.2
-4.5
7.6
2.6
-7.6
-2.8
-7.0
4.8
0.9
:
-13.1
-3.6
3.1
-14.5
-8.2
-7.7
-2.6
-8.1
7.3
-2.1
-1.5
:
-5.9
-4.8
3.7

1993-97
4.6
-1.0
-7.1
4.1
:
0.2
1.1
2.2
:
:
:
4.9
-2.6
-2.7
0.9
-2.4
2.4
0.8
:
-2.3
-3.4
1.5
6.4
:
-4.2
1.6
-3.7
2.2
-0.9
-0.1
:
:
-2.4
2.2

2008
0.6
6.1
-7.3
-5.7
-16.3
-9.2
-1.9
-2.9
-12.1
4.7
-4.6
4.4
4.8
-11.4
-6.0
-5.4
3.2
-0.4
-1.2
-22.4
-2.0
2.9
-11.6
-11.1
-5.9
-4.1
-11.0
8.7
-0.8
-2.9
-4.1
-9.0
-4.7
3.2

2009
0.3
6.0
7.7
-3.1
-13.3
-4.3
-1.7
-2.0
-10.6
6.4
-5.8
2.7
2.8
-9.6
-0.4
-1.7
2.1
0.3
0.0
-7.6
-1.2
3.3
11.1
6.4
1.1
-1.9
-3.6
6.7
-1.0
-0.7
-1.3
-5.1
-3.6
2.7

2010
2.9
6.1
6.8
0.7
-11.0
-3.8
-1.9
-3.6
-9.0
7.6
-3.3
4.5
3.5
-8.4
-0.3
-0.9
1.7
0.4
0.0
0.3
-3.1
5.6
4.9
3.5
3.0
-2.3
-3.7
6.6
-2.3
0.2
-0.4
-1.1
-3.3
3.5

¹ See note 7 on concepts and sources.

TABLE 52 : Current-account balance (in billions of euro, 2005-14)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area
 Euro area, adjusted  ¹
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU
 EU, adjusted  ¹
 Croatia
 USA
 Japan

¹ See note 7 on concepts and sources.

2005
9.7
113.4
-1.1
-4.9
-20.9
-67.8
-10.8
-12.8
-0.8
3.5
-0.4
38.4
5.3
-15.9
-0.5
-3.3
5.5
36.4
10.8
-2.7
-2.1
9.0
-1.6
-1.5
-7.2
-3.1
-7.1
21.1
-37.9
3.3
-83.5
-1.9
-518.9
133.4

2006
10.8
150.0
-2.1
-6.6
-28.7
-88.9
-14.8
-22.3
-1.1
3.5
-0.5
48.7
8.5
-17.3
-0.7
-3.7
7.7
42.5
-12.6
-4.7
-3.1
6.5
-3.6
-2.5
-6.8
-8.3
-10.4
25.2
-57.3
-22.4
-139.6
-2.7
-443.1
136.0

2007
13.2
182.5
-2.5
-10.4
-39.3
-105.2
-25.7
-20.1
-1.9
3.8
-0.2
48.1
10.9
-17.2
-1.6
-3.1
7.6
38.7
7.4
-7.8
-6.8
3.1
-4.7
-4.3
-7.4
-15.8
-17.0
29.0
-47.0
-40.0
-125.9
-3.2
-514.0
153.8

2008
3.7
152.1
-1.4
-10.2
-41.9
-104.3
-36.6
-45.2
-2.1
2.0
-0.3
28.1
13.7
-21.7
-2.3
-4.0
5.8
-64.5
-143.5
-8.2
-4.5
6.8
-3.0
-4.2
-7.3
-17.3
-16.0
29.4
-18.1
-107.0
-261.5
-4.3
-461.3
108.2

2009
2.5
143.1
0.6
-3.8
-33.2
-49.9
-33.2
-30.1
-1.8
2.6
-0.4
18.2
7.5
-18.2
-0.2
-1.6
3.4
5.6
-21.9
-3.1
-4.6
7.3
1.6
0.5
-0.1
-9.6
-4.9
20.1
-19.9
-7.2
-90.3
-2.3
-359.7
102.1

2010
10.8
153.4
0.5
1.8
-28.4
-46.0
-37.9
-54.7
-1.6
3.3
-0.3
29.9
9.9
-16.8
-0.2
-1.7
2.9
24.9
-6.8
-0.1
-7.8
13.0
0.5
-0.1
1.1
-13.6
-4.9
23.7
-43.5
-6.7
-82.2
-0.5
-356.5
147.7

Autumn 2012
forecast
2013
1.0
4.9
2.8
3.3
-3.9
0.0
-1.6
-0.4
-2.7
4.9
2.7
9.5
0.7
-0.1
3.1
2.6
-1.5
1.9
1.7
-0.6
-0.2
4.4
-0.1
0.1
6.2
-1.8
-4.1
6.4
-2.0
1.4
0.8
-1.5
-2.9
1.0

2012
0.8
5.5
2.5
2.1
-6.1
-1.9
-1.9
-1.2
-5.5
4.4
3.0
8.9
0.2
-1.4
2.1
2.7
-1.7
1.4
1.2
-0.2
-1.2
5.4
-0.2
0.5
4.1
-2.0
-4.0
6.3
-3.6
0.7
0.2
-1.2
-3.1
0.8

Autumn 2012
forecast
2013
3.7
135.2
0.0
5.7
-11.6
-5.4
-37.8
-6.0
-0.6
2.2
0.1
60.6
3.9
-3.0
1.0
1.1
-3.2
145.8
119.4
-0.8
-3.2
11.6
-0.7
-1.0
2.7
-13.3
-6.0
28.0
-44.3
118.6
48.8
-0.7
-364.5
49.5

2012
2.6
151.6
-0.1
3.7
-16.2
-25.3
-43.8
-18.6
-1.1
1.9
0.1
56.2
3.4
-5.0
0.7
1.0
-3.0
108.1
81.7
-0.6
-4.4
13.8
-0.6
-0.9
1.6
-15.0
-5.6
26.3
-72.9
49.8
-20.1
-0.5
-377.8
41.2

2014
1.3
4.6
2.6
4.3
-2.7
0.9
-1.6
-0.3
-2.4
4.7
2.5
9.5
1.2
0.3
3.1
3.3
-1.9
2.1
1.8
-0.8
0.5
4.3
-0.2
-0.5
6.6
-2.4
-4.3
6.4
-0.9
1.6
1.1
-2.2
-2.9
1.2

2014
4.8
131.6
0.1
7.5
-9.6
4.4
-41.5
-4.7
-0.5
2.2
0.1
62.2
5.4
-2.5
0.8
1.7
-4.1
157.9
131.5
-1.1
-2.1
10.9
-0.8
-1.3
3.0
-15.4
-6.7
29.1
-23.5
149.9
80.1
-1.0
-389.5
60.3

2011
0.9
5.6
4.5
1.0
-9.8
-3.2
-2.6
-3.3
-4.0
6.8
0.7
7.9
1.0
-5.1
-0.2
-0.8
-1.0
0.4
0.1
2.9
-2.0
6.9
-0.2
-0.4
3.4
-2.4
-4.0
6.4
-1.7
0.3
-0.3
-0.9
-3.3
1.9

2011
3.9
145.9
0.1
2.1
-24.5
-39.4
-51.2
-52.3
-1.9
3.0
0.0
49.8
3.7
-11.3
0.0
-1.7
-2.2
24.1
-2.3
0.2
-6.1
15.9
-0.5
-1.1
1.0
-16.5
-5.6
25.2
-33.4
3.2
-66.6
-0.5
-334.8
84.5

Statistical Annex

19.10.2012

Spring 2012
forecast

2012
1.7
4.7
3.4
1.4
-6.3
-1.4
-2.2
-2.2
-7.8
4.5
-1.3
7.7
1.2
-2.2
0.0
1.6
-0.5
0.7
0.3
1.9
-1.2
4.9
0.8
0.5
5.4
-2.2
-4.9
5.7
-1.5
0.5
-0.2
-1.3
-3.1
1.6

2013
1.8
4.5
2.5
2.7
-4.7
-0.4
-2.0
-1.3
-7.2
4.9
-1.0
8.1
1.7
-1.4
1.2
1.6
-0.6
1.1
0.7
1.2
-1.3
4.7
0.1
0.3
7.0
-2.9
-4.9
5.8
-0.8
0.9
0.2
-2.1
-3.0
1.5

Spring 2012
forecast

2012
5.8
122.4
0.0
2.5
-15.9
-21.4
-49.2
-34.9
-1.4
2.0
-0.2
48.6
5.7
-6.0
-0.1
0.1
-1.2
56.7
13.2
0.3
-5.0
12.8
-0.4
-0.6
2.2
-15.1
-6.9
23.1
-32.5
34.5
-53.8
-0.6
-373.1
75.9

2013
6.2
122.2
-0.1
5.1
-12.8
-10.4
-44.4
-20.8
-1.3
2.3
-0.2
52.2
5.9
-4.8
0.2
0.2
-1.4
98.2
54.7
-0.1
-5.2
12.5
-0.6
-0.7
3.8
-16.9
-7.4
24.3
-19.8
88.0
-0.2
-1.0
-370.8
73.8

173

European Economic Forecast, Autumn 2012

TABLE 53 : Export markets (a) (percentage change on preceding year, 2005-14)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area (b)
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU (b)
 Croatia
 USA
 Japan

2005
6.1
6.2
9.7
5.7
6.5
5.6
6.0
6.7
8.3
5.3
6.4
5.8
6.0
6.2
5.5
5.9
8.4
6.1
6.6
6.5
7.0
9.1
10.2
6.2
7.3
5.6
7.5
6.5
6.3
4.9
6.7
7.2

2006
8.8
8.7
10.0
8.3
8.7
8.3
8.6
9.2
10.8
7.9
8.6
8.8
10.0
8.7
9.3
10.8
10.6
8.8
9.4
10.8
8.8
11.8
12.0
10.2
10.5
8.4
9.0
7.8
8.8
8.8
8.2
8.8

2007
5.3
6.8
9.3
4.1
5.7
5.0
5.9
6.6
6.7
4.9
5.2
5.5
6.8
5.5
7.3
8.3
8.7
6.1
8.5
7.0
6.4
8.9
11.1
7.8
8.0
7.0
5.9
6.2
6.2
6.9
7.2
7.7

2008
2.1
2.2
1.8
1.2
1.7
1.9
1.8
2.7
2.2
1.6
1.8
2.3
2.8
0.9
2.7
3.2
3.6
2.2
2.4
3.2
2.4
3.8
2.5
3.5
3.5
1.7
2.3
1.6
2.2
1.5
3.5
3.7

2009
-10.6
-11.7
-17.7
-11.5
-12.4
-10.6
-11.1
-11.0
-13.6
-11.2
-11.7
-11.2
-11.5
-12.6
-13.1
-12.3
-12.2
-11.3
-12.8
-12.3
-11.4
-17.0
-16.6
-12.5
-12.4
-12.4
-11.9
-11.1
-11.5
-12.7
-11.2
-9.0

2010
10.3
10.5
9.6
10.7
10.4
9.8
10.3
9.9
8.1
10.1
10.3
10.4
11.3
9.7
9.8
11.7
11.9
10.4
9.4
11.2
11.4
12.5
11.2
11.0
11.4
10.2
9.7
10.5
10.5
10.4
13.1
14.8

2011
5.0
5.2
7.4
4.6
4.9
4.2
4.9
5.4
7.4
4.2
4.4
5.2
5.9
3.9
5.5
6.2
7.7
5.1
5.6
5.9
5.4
10.4
9.8
6.1
6.2
5.4
5.0
5.0
5.2
5.3
6.6
7.0

Autumn 2012
forecast
2013
3.0
3.1
3.6
3.3
3.7
3.1
3.4
3.5
4.0
2.9
3.4
3.4
3.9
2.2
3.5
3.5
4.1
3.3
3.1
3.7
3.5
4.3
4.3
3.8
3.8
3.5
3.6
3.5
3.4
3.3
4.8
5.1

2012
1.8
1.9
2.4
1.9
1.9
1.3
1.6
2.4
2.7
1.1
1.7
1.5
1.8
0.3
0.9
1.3
3.4
1.8
0.9
2.0
2.4
3.9
3.9
2.0
2.1
1.4
2.6
2.3
1.9
0.3
4.2
4.8

(a)  Imports of goods and services to the various markets (incl. EU-markets) weighted according to their share in country's exports of goods and services.

(b)  Intra- and extra-EU trade.

TABLE 54 : Export performance (a) (percentage change on preceding year, 2005-14)

 Belgium
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Luxembourg
 Malta
 Netherlands
 Austria
 Portugal
 Slovenia
 Slovakia
 Finland
 Euro area (b)
 Bulgaria
 Czech Republic
 Denmark
 Latvia
 Lithuania
 Hungary
 Poland
 Romania
 Sweden
 United Kingdom
 EU (b)
 Croatia
 USA
 Japan

2005
-1.4
1.4
8.1
-0.5
-3.8
-2.9
-2.7
-5.3
-3.2
-0.8
-5.5
0.2
1.3
-4.0
4.8
3.8
-1.3
-1.0
1.8
4.8
1.0
10.2
6.8
4.8
0.6
1.9
-0.8
1.3
-0.4
-1.3
0.0
-0.2

2006
-3.4
4.0
-3.0
-3.2
-3.1
-1.5
-3.5
-2.7
-6.6
4.7
0.7
-1.4
-2.1
2.7
3.0
9.2
1.4
-0.2
37.7
4.5
0.2
-4.7
0.0
7.7
3.7
1.9
0.0
3.0
0.6
-2.7
0.7
0.8

2007
-0.1
1.1
-5.2
4.1
1.2
1.6
-3.4
-0.3
-0.5
4.0
4.5
0.8
1.9
1.9
6.0
5.5
-0.5
0.5
-2.2
3.9
-3.4
1.0
-7.2
6.6
1.0
0.8
-0.2
-7.1
-0.4
-3.0
2.0
0.9

2008
0.0
0.6
-0.8
-2.3
0.0
-2.9
-2.1
-5.4
-2.7
2.8
-1.2
-0.3
-1.3
-1.0
1.3
-0.1
2.1
-1.1
0.6
0.7
0.9
-1.7
8.7
2.1
3.4
6.5
-0.5
-0.4
-0.6
0.2
2.5
-2.2

2009
-0.6
-1.3
-3.6
8.7
-8.0
0.7
-1.1
-7.3
3.4
0.3
2.7
3.9
-4.6
2.0
-4.2
-4.5
-10.4
-1.3
1.8
3.9
1.8
3.5
4.8
2.6
6.4
6.8
-2.2
3.3
-0.2
-4.0
2.3
-16.7

2010
-0.6
2.9
12.1
-4.1
-4.7
1.3
-0.6
1.4
-4.0
-2.2
7.4
0.7
-2.3
-0.8
0.3
3.9
-3.9
0.7
4.9
3.9
-7.3
-0.8
5.6
2.9
0.6
3.5
1.5
-3.7
0.2
-4.8
-1.7
8.3

2011
0.5
2.5
14.9
0.4
-4.4
3.3
0.3
0.6
-3.8
1.3
-1.8
-1.2
1.3
3.6
1.5
6.1
-4.7
1.2
6.8
3.3
1.5
2.1
3.9
0.2
1.4
4.2
2.0
-0.5
1.1
-3.1
0.1
-6.6

Autumn 2012
forecast
2013
-1.1
1.1
1.2
-0.1
-1.0
1.1
-1.3
-0.5
-3.1
-1.9
0.6
-0.9
0.1
0.5
-0.5
0.8
-3.3
-0.1
0.3
0.2
0.3
0.5
1.0
0.7
0.3
0.4
-0.5
0.4
0.0
-1.7
1.3
-4.2

2012
-2.5
2.0
1.9
0.9
-1.1
0.8
1.0
-1.3
-3.5
-5.2
3.6
2.3
-0.3
4.0
0.3
6.4
-5.9
0.7
0.8
1.9
0.1
1.2
1.0
0.0
0.9
-1.2
-2.0
-2.1
0.3
-1.3
0.2
-2.2

(a)  Index for exports of goods and services divided by an index for growth of markets.

(b)  Intra- and extra-EU trade.

174

19.10.2012

Spring 2012
forecast

2012
2.2
2.6
3.8
2.4
2.5
2.0
2.5
3.0
4.0
1.9
2.4
2.6
2.9
0.9
1.9
2.5
3.9
2.5
2.3
2.7
3.2
3.9
3.9
2.7
2.7
2.1
3.3
2.8
2.6
1.7
5.2
5.5

2013
4.6
4.8
5.5
4.5
4.7
4.6
4.7
5.0
5.5
4.4
4.5
4.8
5.3
3.7
4.9
5.1
5.5
4.8
4.9
5.1
5.0
5.6
5.7
5.1
5.0
4.7
4.8
4.9
4.8
4.7
6.0
6.4

Spring 2012
forecast

2012
-1.4
0.3
-2.3
0.8
0.7
1.2
0.0
-1.8
-2.5
-1.8
0.0
-2.1
-0.1
1.6
0.3
0.6
-1.9
-0.4
1.0
0.9
0.1
0.6
0.3
2.6
0.7
0.8
-1.9
0.3
-0.2
-3.1
-0.3
-2.9

2013
-0.4
0.2
0.1
-0.2
0.7
0.0
0.1
-1.0
-3.0
-0.2
-0.1
-1.0
-0.2
1.0
0.2
1.0
-0.7
-0.2
0.2
0.6
-0.1
0.7
0.2
2.8
0.7
1.0
0.6
-0.2
0.0
-2.1
0.6
-1.5

2014
5.3
5.2
5.6
5.3
5.6
5.3
5.4
5.5
5.7
5.0
5.2
5.4
6.0
4.9
5.7
5.8
5.9
5.4
5.6
5.9
5.4
6.2
6.2
5.8
5.9
5.7
5.0
5.5
5.4
5.6
6.0
6.3

2014
-1.3
1.3
1.1
-1.0
-0.8
0.4
-1.1
-1.3
-4.2
-1.8
-0.4
-0.7
-0.1
-0.1
-0.3
0.7
-4.2
-0.2
-1.1
0.3
-1.2
0.7
0.6
0.7
0.4
0.2
0.6
0.2
-0.1
-2.2
0.3
-2.3

TABLE 55 : World GDP, volume (percentage change on preceding year, 2007-14)

 EU
 Euro area
 Belgium
 Bulgaria
 Czech Republic

 Denmark
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Latvia
 Lithuania
 Luxembourg
 Hungary
 Malta
 Netherlands
 Austria
 Poland
 Portugal
 Romania
 Slovenia
 Slovakia
 Finland
 Sweden
 United Kingdom
 Acc/Candidate countries
 - Croatia
 - Turkey
 - The former Yugoslav     
Republic of Macedonia

 - Iceland
 - Montenegro
 - Serbia
 Potential candidates
 USA
 Japan
 Canada
 Norway
 Switzerland
 Australia
 New Zealand
 Advanced economies
 CIS
  - Russia
  - Other 
 MENA
  Asia
  - China
  - India
  - Hong Kong
  - Korea
  - Indonesia
  Latin America
  - Brazil
  - Mexico
  Sub-Saharan Africa 
 Emerging and developing economies
 World
 World excluding EU
 World excluding euro area

( a )
20.1
14.3
0.6
0.1
0.2

2007
3.2
3.0
2.9
6.4
5.7

2008
0.3
0.4
1.0
6.2
3.1

0.4
4.1
0.0
0.3
0.3
1.7
3.2
2.5
0.0
0.0
0.0
0.1
0.2
0.0
1.0
0.5
0.6
0.3
0.2
0.1
0.1
0.3
0.6
2.8
1.4
0.1
1.2

0.0
0.0
0.0
0.1
0.1
19.2
5.7
1.8
0.3
0.4
1.2
0.2
50.4
4.2
3.0
1.3
5.1
28.9
14.6
5.8
0.5
2.0
1.5
8.8
3.0
2.1
2.5
49.6
100.0
79.9
85.7

1.6
3.3
7.5
5.4
3.5
3.5
2.3
1.7
5.1
9.6
9.8
6.6
0.1
4.6
3.9
3.7
6.8
2.4
6.3
7.0
10.5
5.3
3.3
3.6
4.8
5.1
4.7

6.1
6.0
10.7
5.4
6.4
1.9
2.2
2.2
2.7
3.8
4.9
2.9
2.7
8.9
8.5
9.8
5.4
10.3
14.2
9.3
6.4
5.1
6.3
5.7
6.1
3.4
7.1
8.7
5.7
6.3
6.1

-0.8
1.1
-4.2
-2.1
-0.2
0.9
-0.1
-1.2
3.6
-3.3
2.9
-0.7
0.9
4.0
1.8
1.4
5.1
0.0
7.3
3.4
5.8
0.3
-0.6
-1.0
1.0
2.1
0.7

5.0
1.2
6.9
3.8
6.5
-0.4
-1.0
0.7
0.0
2.2
2.3
-1.4
0.0
5.3
5.2
5.5
4.2
6.9
9.6
6.7
2.3
2.3
6.0
4.3
5.2
1.5
5.4
5.9
2.9
3.6
3.4

2009
-4.3
-4.4
-2.8
-5.5
-4.5

-5.8
-5.1
-14.1
-5.5
-3.1
-3.7
-3.1
-5.5
-1.9
-17.7
-14.8
-4.1
-6.8
-2.4
-3.7
-3.8
1.6
-2.9
-6.6
-7.8
-4.9
-8.5
-5.0
-4.0
-4.9
-6.9
-4.8

-0.9
-6.6
-5.7
-3.5
0.2
-3.1
-5.5
-2.8
-1.7
-1.9
1.5
-0.4
-3.8
-6.7
-7.8
-4.0
2.2
6.3
9.2
8.4
-2.6
0.3
4.6
-1.8
-0.3
-6.4
2.6
3.1
-0.3
0.6
0.4

(a)  Relative weights in %, based on GDP (at constant prices and PPS) in 2011.

Statistical Annex

Autumn 2012
forecast
2013
0.4
0.1
0.7
1.4
0.8

2012
-0.3
-0.4
-0.2
0.8
-1.3

2014
1.6
1.4
1.6
2.0
2.0

19.10.2012

Spring 2012
forecast

2012
0.0
-0.3
0.0
0.5
0.0

2013
1.3
1.0
1.2
1.9
1.5

2010
2.1
2.0
2.4
0.4
2.5

2011
1.5
1.4
1.8
1.7
1.9

1.3
4.2
3.3
-0.8
-4.9
-0.3
1.7
1.8
1.3
-0.9
1.5
2.9
1.3
3.4
1.6
2.1
3.9
1.4
-1.6
1.2
4.4
3.3
6.6
1.8
7.5
-1.4
9.2

2.9
-4.0
2.5
1.0
2.2
2.4
4.5
3.2
0.7
3.0
2.4
2.6
2.7
4.8
4.3
6.0
4.5
9.0
10.3
8.4
7.0
6.2
6.1
6.1
7.5
5.3
5.2
7.5
5.1
5.8
5.6

0.8
3.0
8.3
1.4
-7.1
0.4
1.7
0.4
0.5
5.5
5.9
1.7
1.6
1.9
1.0
2.7
4.3
-1.7
2.5
0.6
3.2
2.7
3.9
0.9
7.4
0.0
8.5

2.8
2.6
3.2
1.6
2.4
1.8
-0.8
2.4
1.4
1.9
2.1
1.3
1.6
4.8
4.3
6.0
4.4
7.3
9.2
7.2
5.0
3.6
6.5
4.5
2.7
4.0
4.6
6.1
3.8
4.4
4.3

0.6
0.8
2.5
0.4
-6.0
-1.4
0.2
-2.3
-2.3
4.3
2.9
0.4
-1.2
1.0
-0.3
0.8
2.4
-3.0
0.8
-2.3
2.6
0.1
1.1
-0.3
2.4
-1.9
3.0

0.8
2.7
0.2
-1.6
0.9
2.1
2.0
2.0
3.1
1.0
3.2
2.0
1.2
3.8
3.7
3.9
3.2
6.2
7.7
5.0
4.8
2.7
6.0
2.9
1.5
3.7
5.0
5.0
3.1
3.9
3.7

1.6
0.8
3.1
1.1
-4.2
-1.4
0.4
-0.5
-1.7
3.6
3.1
0.7
0.3
1.6
0.3
0.9
1.8
-1.0
2.2
-1.6
2.0
0.8
1.9
0.9
2.6
0.0
2.9

1.7
2.3
2.4
1.5
1.9
2.3
0.8
2.1
2.5
1.4
2.9
3.0
1.4
4.0
3.9
4.3
3.1
6.3
7.7
5.8
4.1
2.7
6.2
3.7
3.9
3.5
5.0
5.3
3.3
4.0
3.9

1.3
2.0
4.0
2.2
0.6
0.8
1.2
0.8
-0.7
3.9
3.6
1.5
1.3
2.1
1.4
2.1
2.6
0.8
2.7
0.9
3.0
1.3
2.5
2.0
3.5
1.4
3.7

2.2
2.9
3.0
2.0
2.7
2.6
1.9
2.2
2.3
1.9
2.9
3.2
2.2
4.3
4.0
4.8
3.8
6.7
7.8
6.6
4.0
3.0
6.4
4.4
4.0
3.8
5.5
5.7
3.9
4.5
4.3

1.1
0.7
1.6
0.5
-4.7
-1.8
0.5
-1.4
-0.8
2.2
2.4
1.1
-0.3
1.2
-0.9
0.8
2.7
-3.3
1.4
-1.4
1.8
0.8
0.3
0.5
2.8
-1.2
3.3

1.7
2.1
0.4
0.3
1.7
2.0
1.9
2.0
1.7
0.9
3.0
2.9
1.2
3.7
3.6
4.0
3.1
6.9
8.4
6.8
4.2
3.3
5.8
3.6
3.1
3.3
4.5
5.5
3.3
4.1
3.9

1.4
1.7
3.8
1.9
0.0
-0.3
1.3
0.4
0.3
3.6
3.5
2.1
1.0
1.9
0.7
1.7
2.6
0.3
2.9
0.7
2.9
1.6
2.1
1.7
4.2
0.8
4.6

2.5
2.4
2.0
1.9
2.3
2.1
1.7
2.3
2.0
1.7
2.9
3.2
1.8
3.9
3.8
4.2
3.4
7.0
8.2
7.5
4.1
3.6
6.4
4.0
4.2
3.5
5.0
5.7
3.7
4.3
4.2

175

European Economic Forecast, Autumn 2012

TABLE 56 : World exports of goods and services, volume (percentage change on preceding year, 2007-14)

 EU (b)
 Euro area (b)
 Acc/Candidate countries
 - Croatia
 - Turkey
 - The former Yugoslav 
Republic of Macedonia

 - Iceland
 - Montenegro
 - Serbia
 USA
 Japan
 Canada
 Norway
 Switzerland
 Australia
 New Zealand
 Advanced economies
 CIS
  - Russia
  - Other 
 MENA
  Asia
  - China
  - India
  - Hong Kong
  - Korea
  - Indonesia
  Latin America
  - Brazil
  - Mexico
  Sub-Saharan Africa 
 Emerging and developing economies
 World
 World excluding EU
 World excluding euro area

( a )
35.3
26.5
1.1
0.1
0.8

0.0

0.0
0.0
0.1
9.6
4.1
2.5
0.9
1.6
1.3
0.2
56.6
4.0
2.7
1.4
6.2
25.4
9.6
2.0
2.6
3.1
1.0
5.7
1.4
1.7
2.1
43.4
100.0
64.7
73.5

2007
5.7
6.6
7.4
3.7
7.3

11.8

17.7
:
:
9.3
8.7
1.2
1.4
9.9
3.0
3.2
6.3
5.1
6.3
2.8
10.2
20.2
36.7
7.5
7.8
12.1
6.6
6.4
7.9
5.6
6.5
14.9
10.0
12.4
11.4

2008
1.6
1.1
2.5
1.7
2.7

-6.3

7.0
:
:
6.1
1.4
-4.7
0.1
2.9
6.1
-1.3
2.2
10.4
0.6
29.5
6.3
5.9
5.5
18.2
2.9
13.5
12.3
1.8
2.9
1.3
16.8
6.4
4.0
5.3
5.1

2009
-11.6
-12.4
-6.2
-16.2
-5.0

-15.8

7.0
:
:
-9.1
-24.2
-13.8
-4.2
-7.7
-5.2
3.9
-11.7
-15.8
-4.7
-37.5
-11.3
-10.6
-11.7
-8.0
-12.3
0.7
-17.5
-10.3
-3.5
-10.3
-33.0
-12.2
-11.9
-12.1
-11.7

2010
10.7
11.2
4.0
5.2
3.4

23.6

0.6
:
:
11.1
24.3
6.4
1.8
7.8
12.9
-3.3
11.2
11.6
7.0
20.4
3.2
16.7
13.3
22.0
18.3
13.0
22.2
11.9
11.4
24.1
17.2
13.7
12.3
13.2
12.7

(a)  Relative weights in %, based on exports of goods and services (at current prices and current exchange rates) in 2011.

(b)  Intra- and extra-EU trade.

TABLE 57 : Export shares in EU trade (goods only - 2011)

EU
66.2
65.7
75.2
64.7
83.4
67.8
60.9
71.0
57.2
57.5
67.6
60.9
55.9
66.3
71.3
65.8
82.7
75.1
49.8
79.2
71.7
79.8
73.2
70.1
72.8
86.8
56.3
59.5
58.1

Euro Acc/Cand
area countries
2.2
2.2
1.3
14.9
1.7
1.3
2.2
2.1
0.6
13.7
2.4
1.8
3.6
0.3
1.3
0.8
1.6
4.3
5.6
1.1
2.3
2.4
1.0
8.5
11.4
2.3
1.8
1.5
1.6

49.6
49.2
62.0
47.8
66.7
39.3
40.8
31.9
38.4
40.1
55.5
48.5
42.7
47.4
36.5
36.2
68.8
54.0
40.2
63.8
54.4
55.5
63.7
52.3
56.2
48.5
31.9
40.4
51.3

Other
advanced
Japan economies
5.4
5.4
2.9
1.4
2.6
8.8
7.0
4.4
6.8
2.1
4.1
5.2
7.3
1.7
3.1
4.5
4.0
1.9
1.8
2.8
6.3
2.8
2.1
1.7
1.9
1.7
7.3
11.5
6.6

1.2
1.2
0.8
0.2
0.4
2.0
1.4
0.6
2.3
0.4
1.1
1.7
1.5
1.4
0.4
0.2
0.3
0.7
2.2
0.8
0.9
0.4
0.7
0.6
0.2
0.2
1.9
1.3
1.5

USA
5.9
5.8
4.4
1.5
2.0
6.0
6.3
5.1
23.9
4.4
3.9
6.0
6.5
0.8
1.9
3.6
2.4
2.5
4.2
3.6
4.8
2.1
4.0
2.1
1.6
1.3
5.3
6.0
11.2

 EU
 Euro area
 Belgium
 Bulgaria
 Czech Republic
 Denmark
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Latvia
 Lithuania
 Luxembourg
 Hungary
 Malta
 Netherlands
 Austria
 Poland
 Portugal
 Romania
 Slovenia
 Slovakia
 Finland
 Sweden
 United Kingdom

176

2011
6.4
6.3
6.0
2.0
6.5

11.3

4.1
:
:
6.7
-0.1
6.4
-1.4
3.8
-5.9
0.5
5.5
9.5
0.4
27.2
28.2
7.1
3.2
19.4
4.4
9.4
20.0
8.8
6.5
12.1
14.1
10.9
7.8
8.6
8.4

China
3.2
3.5
2.0
1.6
1.2
2.6
5.8
1.2
2.1
1.3
2.2
3.4
3.1
0.8
0.5
0.3
1.2
1.9
11.5
1.4
2.5
1.1
1.5
1.2
0.6
2.5
5.2
3.5
2.8

Autumn 2012
forecast
2013
3.4
3.2
4.6
1.5
5.0

2012
2.2
2.5
8.0
-1.0
9.7

2014
5.3
5.2
6.0
3.3
6.5

19.10.2012

Spring 2012
forecast

2012
2.4
2.1
3.0
-1.5
3.7

2013
4.8
4.6
7.4
2.5
8.3

1.5

4.2
-0.4
2.7
4.4
2.5
3.9
3.6
1.1
4.5
2.9
2.8
4.7
3.7
6.7
4.5
5.8
5.3
4.4
7.4
6.0
6.5
4.4
2.9
4.9
7.0
5.4
4.0
4.9
4.5

Rest
Asia
4.7
4.7
4.8
2.5
1.6
4.0
5.5
1.7
2.9
4.9
2.7
6.1
5.4
14.4
3.4
1.2
1.5
2.9
17.0
3.6
3.5
1.3
1.2
2.1
1.5
0.6
5.8
5.3
7.5

5.1

3.9
2.9
11.5
6.2
0.7
5.4
2.5
2.3
5.0
4.1
3.8
5.9
4.4
8.9
4.2
5.2
3.9
4.7
6.8
5.0
6.7
5.5
5.3
5.8
5.6
5.2
4.4
4.9
4.8

CIS
3.1
2.8
1.4
6.3
4.0
2.3
3.7
11.4
0.8
3.2
1.7
2.0
3.6
2.7
15.6
21.5
2.1
5.8
0.6
1.7
3.4
7.8
0.7
6.4
5.8
3.5
9.4
2.4
1.6

8.0

3.9
3.1
4.6
6.3
3.9
6.0
2.4
3.8
5.1
4.2
5.3
5.3
5.2
5.6
4.9
5.7
5.0
5.1
6.8
6.0
7.0
6.5
6.4
6.9
6.6
5.7
5.5
5.6
5.6

4.0

2.3
1.9
3.3
4.9
2.4
5.4
0.4
2.6
4.9
4.3
3.0
3.9
3.6
4.3
4.2
6.8
8.2
8.0
6.8
4.3
5.4
5.3
3.4
5.2
2.2
5.8
4.2
5.2
4.9

8.0

2.6
3.3
7.5
6.6
4.8
6.0
1.0
3.4
5.3
5.3
5.1
4.7
4.7
4.8
4.4
6.6
7.6
6.2
6.8
5.0
7.0
5.9
6.7
6.1
5.2
6.0
5.5
5.9
5.8

Latin
MENA America
2.4
2.6
1.5
0.6
0.8
2.0
2.8
0.8
1.2
1.1
5.7
2.6
3.8
0.2
0.2
0.3
0.9
0.8
1.6
1.6
1.7
0.7
3.7
0.8
0.7
0.5
2.7
2.8
2.0

4.1
4.3
3.6
4.8
1.6
2.5
3.2
0.7
1.5
10.2
7.1
7.4
7.9
10.2
2.1
0.9
2.2
3.2
4.8
2.5
2.2
1.2
3.4
5.8
3.1
0.5
3.0
3.9
4.3

       Sub

Saharan
Africa
1.7
1.7
2.0
1.4
0.6
0.7
1.2
0.9
0.6
1.2
1.6
3.0
1.5
1.2
0.2
0.9
1.1
1.0
0.9
1.7
0.6
0.5
8.5
0.8
0.3
0.1
1.3
2.3
2.8

 
TABLE 58 : World imports of goods and services, volume (percentage change on preceding year, 2007-14)

 EU (b)
 Euro area (b)
 Acc/Candidate countries
 - Croatia
 - Turkey
 - The former Yugoslav 
Republic of Macedonia

 - Iceland
 - Montenegro
 - Serbia
 USA
 Japan
 Canada
 Norway
 Switzerland
 Australia
 New Zealand
 Advanced economies
 CIS
  - Russia
  - Other 
 MENA
  Asia
  - China
  - India
  - Hong Kong
  - Korea
  - Indonesia
  Latin America
  - Brazil
  - Mexico
  Sub-Saharan Africa 
 Emerging and developing economies
 World
 World excluding EU
 World excluding euro area

( a )
35.1
26.2
1.4
0.1
1.1

0.0

0.0
0.0
0.1
12.5
4.5
2.6
0.6
1.3
1.3
0.2
59.5
3.2
1.9
1.2
4.8
24.9
8.9
2.5
2.6
2.9
0.9
5.6
1.4
1.8
2.1
40.5
100.0
64.9
73.8

2007
5.9
6.3
10.1
6.1
10.7

16.1

-1.5
:
:
2.4
2.3
5.9
10.0
6.2
10.3
6.5
5.1
20.6
26.2
11.6
13.2
7.7
10.6
12.1
8.2
9.9
5.5
12.9
14.2
7.3
11.9
10.3
7.2
8.0
7.7

2008
1.1
0.9
-3.6
4.0
-4.1

0.8

-18.4
:
:
-2.7
0.3
1.5
3.9
-0.3
11.9
-5.4
0.4
13.5
14.8
11.4
13.6
8.1
6.2
27.7
2.1
5.6
21.3
6.3
6.5
3.6
13.0
9.2
3.9
5.5
5.0

2009
-11.6
-11.1
-15.2
-21.4
-14.3

-14.3

-24.0
:
:
-13.5
-15.7
-13.4
-12.5
-5.2
-11.3
-9.0
-12.3
-28.0
-30.4
-24.1
-1.3
-6.5
1.4
-1.9
-10.5
-3.1
-15.7
-17.5
-13.1
-17.0
-20.6
-9.8
-11.3
-11.2
-11.4

2010
9.6
9.6
17.9
-1.4
20.7

9.5

4.5
:
:
12.5
11.2
13.1
9.9
7.4
9.6
6.9
10.7
19.3
25.8
9.0
-0.4
22.1
24.4
24.6
17.2
14.8
6.4
18.9
27.8
23.3
4.7
17.9
13.6
15.7
15.0

(a)  Relative weights in %, based on imports of goods and services (at current prices and current exchange rates) in 2011.

(b)  Intra- and extra-EU trade.

TABLE 59 : Import shares in EU trade (goods only - 2011)

 EU
 Euro area
 Belgium
 Bulgaria
 Czech Republic
 Denmark
 Germany
 Estonia
 Ireland
 Greece
 Spain
 France
 Italy
 Cyprus
 Latvia
 Lithuania
 Luxembourg
 Hungary
 Malta
 Netherlands
 Austria
 Poland
 Portugal
 Romania
 Slovenia
 Slovakia
 Finland
 Sweden
 United Kingdom

EU
63.5
63.3
69.0
61.4
76.9
72.6
65.7
75.0
71.2
55.1
58.5
69.5
56.9
61.8
59.6
57.3
81.9
70.9
44.4
46.3
80.9
72.4
72.9
73.5
70.8
76.3
60.7
71.2
53.6

Euro Acc/Cand
area countries
1.4
1.4
0.8
7.0
0.9
1.1
1.5
0.6
0.5
3.6
1.3
1.1
2.2
0.4
0.5
1.0
1.1
1.6
5.2
0.9
1.7
1.0
0.5
4.4
9.1
1.0
0.5
0.8
1.4

49.0
48.7
57.9
44.0
61.6
47.2
46.2
33.4
26.3
43.9
48.7
58.2
46.1
48.3
30.9
31.9
77.7
54.9
35.3
34.5
67.8
57.4
65.6
51.4
59.1
40.1
36.8
50.2
45.5

Other
advanced
economies
8.7
4.6
3.3
1.4
1.8
7.4
6.4
2.4
4.7
2.3
2.6
4.3
4.2
1.4
1.9
1.2
1.7
1.2
1.8
5.0
5.6
2.0
2.2
1.3
1.2
0.8
5.1
8.7
10.9

Japan

1.5
1.5
1.7
0.3
1.2
0.5
1.9
0.5
1.3
0.6
0.9
1.1
1.0
1.5
0.2
0.2
0.7
1.7
2.3
2.8
0.7
0.9
0.6
0.6
0.3
0.7
0.9
1.2
2.2

USA
4.1
4.1
6.1
0.9
1.2
2.5
3.8
1.3
12.1
1.7
3.1
3.6
3.0
0.9
1.7
2.4
5.2
1.7
4.4
6.3
1.7
1.3
1.6
1.2
1.9
0.5
3.0
3.1
7.5

2011
4.1
4.2
9.7
1.2
10.6

14.0

6.8
:
:
4.8
6.3
7.6
3.5
4.2
2.0
3.4
4.7
18.9
20.3
16.7
15.6
8.7
10.2
9.6
4.1
1.4
6.3
11.0
2.0
10.5
9.0
10.7
7.1
8.7
8.1

China
6.3
6.2
4.3
3.2
6.5
6.6
6.8
5.2
3.5
6.1
5.8
4.5
7.0
6.7
4.0
3.3
6.0
7.8
11.8
10.5
2.1
5.1
3.0
4.7
4.7
3.7
6.0
4.4
7.8

Statistical Annex

Autumn 2012
forecast
2013
2.4
2.1
3.4
2.0
3.5

2012
0.1
-0.5
4.0
-2.5
4.7

2014
4.9
5.0
7.7
4.0
8.1

19.10.2012

Spring 2012
forecast

2012
0.9
0.4
4.8
-2.1
5.7

2013
3.9
3.9
4.9
4.1
4.9

2.3

5.7
2.0
3.1
3.8
6.3
3.7
4.9
3.2
7.9
4.3
1.9
9.2
10.8
6.5
5.0
5.6
5.2
5.0
7.6
4.3
5.9
5.4
5.4
5.9
4.9
5.7
3.4
5.3
4.8

Rest
Asia
5.2
5.2
5.2
2.0
4.5
4.0
5.3
2.6
3.6
5.9
4.6
4.2
5.0
8.7
2.7
1.7
1.0
4.8
20.4
7.6
2.1
3.8
2.9
2.8
6.5
6.0
4.4
3.7
7.3

5.5

5.2
3.3
3.8
5.3
-0.4
5.2
3.2
2.0
7.6
5.1
3.1
7.6
9.2
5.1
5.5
5.2
3.9
5.2
7.7
4.1
6.0
7.4
8.2
8.1
5.0
5.7
4.1
5.1
4.9

CIS
5.3
5.0
2.0
20.1
6.3
2.0
4.0
11.5
0.2
10.1
3.0
3.6
7.3
7.6
28.8
31.1
0.1
9.3
7.8
8.7
2.8
12.0
2.8
9.2
1.3
10.7
16.4
4.7
1.9

7.9

5.7
3.5
4.2
7.6
1.0
6.0
2.6
3.6
7.6
4.8
5.3
8.0
9.3
5.9
5.8
5.9
5.0
5.7
7.7
5.6
6.1
8.5
9.4
9.2
5.0
6.4
5.7
6.2
6.0

2.6

3.7
0.3
2.3
3.7
4.1
6.3
4.1
3.0
7.4
5.2
2.3
6.8
9.0
3.3
5.4
6.8
7.9
7.5
7.7
4.2
6.5
8.4
12.4
6.3
3.2
6.7
4.0
5.8
5.3

7.9

3.5
1.8
4.7
5.4
3.6
6.8
3.2
4.8
7.9
5.6
4.5
6.8
8.6
3.8
5.3
7.1
8.4
6.2
7.7
5.4
7.1
7.9
11.2
7.5
5.8
6.9
5.5
6.3
6.0

Latin
MENA America
2.4
2.7
2.7
1.6
0.2
2.0
1.9
0.3
1.3
1.5
6.0
1.4
3.0
0.6
0.2
0.5
2.2
0.9
0.2
5.1
0.4
0.7
4.3
1.2
2.0
0.1
2.0
1.4
2.4

3.4
4.0
3.4
2.0
0.3
0.9
1.4
0.2
0.5
12.6
9.7
4.7
7.7
10.1
0.2
0.8
0.1
0.3
1.8
4.2
1.4
0.5
3.7
0.9
1.7
0.3
0.2
0.5
3.0

       Sub

Saharan
Africa
1.7
1.9
1.4
0.2
0.2
0.4
1.3
0.4
0.9
0.6
4.4
2.0
2.4
0.2
0.0
0.5
0.0
0.1
0.1
2.4
0.8
0.3
5.5
0.3
0.4
0.0
0.8
0.4
2.1

177

 
European Economic Forecast, Autumn 2012

TABLE 60 : World merchandise trade balances (fob-fob, in billions of US dollar, 2006-14)

 EU
 EU, adjusted ¹
 Euro area
 Euro area, adjusted ¹
 Acc/Candidate countries
 USA
 Japan
 Norway
 Switzerland
 Advanced economies
 CIS
  - Russia
 MENA
  Asia
  - China
  Latin America
  Sub-Saharan Africa 
 Emerging and developing economies
 World

¹ See note 7 on concepts and sources.

2006
-89.8
-204.9
63.4
10.2
-53.9
-860.5
81.4
56.1
1.8
-832.9
142.8
139.6
293.6
314.1
217.7
99.5
46.9
896.9
64.0

2007
-121.9
-212.1
99.9
57.8
-63.3
-838.7
104.7
53.5
5.2
-835.9
121.8
130.9
289.9
422.0
315.4
71.3
50.5
955.5
119.6

2008
-205.0
-326.3
29.0
-32.0
-68.5
-848.8
39.0
78.8
10.9
-957.9
213.9
177.8
394.7
342.1
360.7
44.6
67.5
1062.7
104.8

TABLE 61 : World current-account balances (in billions of US dollar, 2006-14)

 EU
 EU, adjusted ¹
 Euro area
 Euro area, adjusted ¹
 Acc/Candidate countries
 USA
 Japan
 Norway
 Switzerland
 Advanced economies
 CIS
  - Russia
 MENA
  Asia
  - China
  Latin America
  Sub-Saharan Africa 
 Emerging and developing economies
 World

¹ See note 7 on concepts and sources.

2006
-28.1
-175.2
53.4
-15.8
-43.5
-556.1
170.6
55.8
56.9
-375.9
94.3
95.2
265.9
355.4
232.7
51.0
20.9
787.5
411.6

2007
-54.7
-172.4
53.0
10.1
-55.0
-704.0
210.7
49.1
39.6
-576.3
66.4
78.0
253.5
522.8
354.0
14.1
-0.5
856.4
280.1

2008
-156.9
-383.5
-94.6
-210.4
-65.4
-676.5
158.7
72.9
12.9
-710.8
99.0
102.0
337.3
483.9
412.4
-29.1
-6.3
884.8
174.0

2009
-47.7
-119.2
76.1
43.5
-35.2
-522.8
43.2
41.6
12.4
-515.5
103.6
110.7
156.6
314.7
249.5
53.7
22.5
651.1
135.6

2009
-10.0
-125.6
7.8
-30.5
-22.7
-500.4
142.1
40.6
58.4
-385.3
33.7
48.5
81.2
422.8
261.1
-21.6
-29.8
486.4
101.2

2010
-71.9
-169.4
76.2
20.0
-63.8
-668.5
91.0
51.0
13.0
-637.5
164.5
151.9
252.5
294.7
254.2
50.6
40.6
802.8
165.4

2010
-8.9
-108.9
33.0
-9.0
-52.3
-472.4
195.8
51.9
83.2
-299.1
63.3
70.9
178.9
435.3
305.3
-50.9
-32.4
594.3
295.2

2011
-89.2
-195.7
67.4
6.8
-103.2
-754.7
-21.7
66.3
16.6
-867.6
234.8
198.6
402.1
210.0
243.5
96.8
75.1
1018.7
151.2

2011
4.5
-92.6
33.5
-3.2
-70.2
-465.7
117.6
70.3
76.9
-355.3
102.3
100.9
317.2
336.2
201.0
-63.9
-26.1
665.7
310.4

TABLE 62 : Primary commodity prices (in US dollar, percentage change on preceding year, 2006-14)

Autumn 2012
forecast
2013
33.1
-66.5
206.2
149.6
-101.7
-777.1
-84.1
69.3
23.3
-847.4
248.3
195.8
421.3
241.3
283.9
33.0
87.8
1031.8
184.4

Autumn 2012
forecast
2013
154.2
63.4
189.5
155.3
-68.1
-473.9
64.3
74.4
74.6
-281.2
127.7
70.6
297.5
312.1
242.6
-85.7
17.4
669.0
387.8

2014
52.7
-46.9
223.7
167.1
-113.0
-874.7
-75.7
72.8
23.3
-940.7
261.8
209.4
302.3
427.9
319.9
12.6
94.4
1098.9
158.3

2014
194.9
104.1
205.3
171.0
-78.9
-506.4
78.4
78.3
75.6
-283.9
128.7
70.1
261.4
494.6
276.3
-114.7
20.1
790.1
506.2

2012
-8.8
-107.6
163.1
106.9
-95.5
-763.7
-88.0
65.5
22.4
-865.7
221.5
182.9
394.2
282.3
253.6
58.0
88.7
1044.7
179.0

2012
64.2
-25.9
139.4
105.4
-72.1
-487.4
53.2
69.9
70.7
-392.0
109.1
70.6
309.8
302.4
215.3
-56.2
22.0
687.1
295.1

19.10.2012

Spring 2012
forecast

2012
-50.0
-131.8
90.5
47.7
-105.6
-814.1
8.0
60.9
19.4
-871.3
235.9
192.0
679.8
82.3
267.4
32.5
86.9
1117.6
246.3

2013
9.6
-72.2
134.3
91.5
-108.7
-848.6
3.0
60.1
16.4
-877.3
247.4
202.9
557.0
262.2
306.3
9.8
83.4
1159.8
282.6

Spring 2012
forecast

2012
45.1
-70.4
74.2
17.3
-80.2
-488.8
99.4
45.6
59.4
-405.3
132.2
88.8
323.7
203.2
262.6
-75.7
20.3
603.6
198.3

2013
115.3
-0.3
128.6
71.7
-83.0
-485.7
96.7
43.3
61.6
-362.7
134.4
89.4
280.7
374.3
293.2
-104.2
12.2
697.4
334.8

2006
10.3
32.5

2007
12.6
12.3

2008
21.6
8.8

2009
-11.1
-23.6

2010
10.9
39.9

2011
17.4
19.2

Autumn 2012
forecast
2013
-1.1
0.8

2012
-2.5
-13.9

Spring 2012
forecast

2014
-3.2
0.4

2012
-7.2
-5.9

2013
-2.1
1.8

9.1

11.3

7.7

-20.2

29.7

25.9

-12.0

8.5
53.4
19.6

20.2

22.3
20.0

0.3
12.9
8.5

3.0
9.5
38.1

-10.3
-25.7
-36.7

9.4

36.2

-36.9

12.4
9.2

14.1
33.9

-18.0
-34.0

6.2
46.6
26.3

28.8

25.9
26.3

9.0
15.2
38.0

38.3

18.4
34.5

                                         Crude petroleum - price per barrel

66.2
52.7

72.4
52.9

98.6
67.2

62.3
44.8

80.2
60.5

110.9
79.7

-5.0
-15.1
2.0

1.5

-9.1
0.3

112.5
87.3

-4.5

-0.1
4.3
-3.0

-3.1

0.0
-2.6

-1.1

-0.1
1.3
-5.0

-5.5

-1.2
-4.4

-5.6

0.8
-6.1
5.9

5.3

-6.5
3.9

-1.5

3.8
3.9
-5.2

-5.6

0.2
-4.5

109.1
83.9

103.1
79.3

116.8
89.2

110.2
84.1

SITC
Classification
Food  (0 + 1)
Basic materials  (2 + 4)
- of which :
    Agricultures non-food
    - of which :
        Wood and pulp
   Minerals and metals
Fuel products  (3)
- of which :
    Crude petroleum
Primary commodities
- Total excluding fuels
- Total including fuels

Brent (usd)
Brent (euro)

178

Note on concepts and sources

1. The directorate general for economic and financial affairs (DG 
    ECFIN) produces, under its own responsibility, short-term fully-
    fledged economic forecasts twice a year : in the spring and in 
    the autumn. These forecasts cover the principal macroeconomic 
    aggregates for the Member States, the candidate countries,
    the European Union as a whole, the euro area and the 
    international environment. Interim forecasts, updating the outlook
    for the seven largest Member States, EU and the euro area,
    are presented in between the fully-fledged forecasts.

2. Data for 2012, 2013 and 2014 are forecasts.
    The source for all tables is the European Commission,
    unless otherwise stated.
    Historical data for the Member States are based on the European 
    System of Accounting (ESA 1995). Most Member States have
    now introduced chain-linking in their national accounts to measure
    the development of economic aggregates in volume terms.
    For the USA and Japan the definitions are as in the SNA.

3. Tables 5 and 6 on domestic demand and final demand respectively,
     present data including inventories.

4. In Tables 17 and 18, the data are based on the national index for USA 
    and Japan, and for EU Member States and aggregates prior to 1996.

5. The potential output gap is calculated with reference to potential
    output as estimated via a production function, where the increase in
    the capital stock and the difference between actual unemployment
    and the NAWRU play a key role.

6. Employment data used in tables 22-26, 28 and 32-33 are based on 
    full-time-equivalents (FTEs), where available. Currently, Germany,
    Estonia, Spain, France, Italy, Hungary and the Netherlands
    report FTE data (taken together, these countries represent
    over 80% of euro-area GDP and more than 60% of EU GDP).  In the
    absence of FTE data, employment is based on numbers of persons.
    In the calculation of EU and euro-area aggregates, priority is given to
    FTE data, as this is regarded as more representative of diverse
    patterns of working time.

7. EU and euro-area data are aggregated using exchange rates.
    World GDP is aggregated using Purchasing Power Standards (PPS).
    In the tables on world trade and international payments, the
    aggregation is carried out on the basis of current exchange rates.

Statistical Annex

    Tables 49 - 52, 60 and 61 show also EU and euro-area "adjusted" 
    balances. Theoretically, balances of EU and euro area vis-à-vis
    third countries should be identical to the sum of the balances of
    the individual countries in the EU or  the euro area. However,
    intra-EU or intra-euro-area balances are non-zero because of 
  reporting errors. The creation of the internal market in 1993 
    reduced border controls and formalities, and accordingly the
     scope and precision of intra-EU trade coverage. Typically,
    intra-EU imports are underestimated compared to intra-EU exports,
     leading to an overestimation of the surplus. For the past the 
     "adjusted" balances are Eurostat estimates for EU and ECB
  estimates for the euro area. For the future, they are ECFIN's 
     forecasts based on the extrapolation of the discrepancies 
     observed in 2011.

8. With respect to the 12 RAMS (recently-acceded Member States),
  which are currently in a transition phase, the quality of statistical
   data may not always be directly comparable to most EU15
     Member States.

9. Geographical zones are defined as follows :
      Euro area :
          EA17 (BE,DE,EE,IE,EL,ES,FR,IT,CY,LU,MT,NL,AT,PT,SI,SK,FI)
      Acceding countries : 
          Croatia.
      Candidate countries :
          Turkey, the former Yugoslav Republic of Macedonia
          Iceland, Montenegro and Serbia.
      Potential candidates :
          Albania, Bosnia-Herzegovina and Kosovo.
      Advanced economies :
          EU, candidate countries, USA, Japan, Canada, Norway,
          Switzerland, Australia and New Zealand.
      MENA (Middle East and Northern Africa) :
          Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait,
          Lebanon, Libya, Morocco, Oman, Qatar, Saudi Arabia, Syria,

   Tunisia, and the United Arab Emirates.

      Asia :
          All countries in that region except Japan and 
          the Asian MENA countries.
      Latin America :
          All countries in that region.

  Sub-Saharan Africa :

          All countries in that region except the African MENA countries.

179

 
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2012

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European Commission 

European Economy – 7/2012 – European Economic Forecast – Autumn 2012 
Luxembourg: Publications Office of the European Union 

2012 — x, 179 pp. — 21 x 29.7 cm 

ISBN 978-92-79-22855-1 
doi: 10.2765/19623 

Price (excluding VAT) in Luxembourg: 15 EUR