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Presentation of the 2015 Winter Economic Forecast

Speaking Points of Mr Pierre Moscovici, European Commissioner for Economic and Financial Affairs, Taxations and Customs, on the presentation of the European Economic Winter Forecast 2015. Please find the powerpoint presentation here.

: All EU economies set to grow in 2015

Bienvenue à cette présentation des prévisions économiques d’hiver de la Commission européenne.

Depuis la publication de nos prévisions d’automne, il y a exactement trois mois, la reprise graduelle que nous anticipions en Europe s’est confirmée.

Toutefois, un certain nombre d’éléments nouveaux sont intervenus et nous a conduit à réviser légèrement à la hausse nos prévisions :

  • les prix du pétrole ont fortement diminué
  • l’euro s’est déprécié de façon significative
  • la BCE a annoncé la mise en œuvre d’un nouveau programme d’achat d’obligations souveraines, pour lutter contre une inflation trop faible;

Ces facteurs doivent permettre le retour de la croissance dans l’Union européenne et dans la zone euro en 2015 et en 2016. La diminution des effets de la crise, les signes d’amélioration sur le front de l’emploi, les réformes structurelles qui commencent à porter leurs fruits sont autant d’éléments qui contribueront à raffermir la reprise économique.

: Forte baisse des prix du pétrole

Avec l’évolution des prix du pétrole, les prix continueront à baisser dans les mois à venir, jusqu’à ce qu’une croissance plus forte, l’effet de la dépréciation de l’euro, et des mesures de la BCE, permettent le redressement de l’inflation.

Comme vous pouvez le voir sur ce graphique, depuis le pic de juin 2014 à 115 dollars le baril, les prix du pétrole ont fortement chuté. Le prix du baril a été divisé par deux et se situe actuellement autour de 50 dollars. Toutefois, en raison de la baisse de la monnaie commune, la baisse du prix du pétrole est moins prononcée en euros.

Cette chute des prix du pétrole devrait stimuler la croissance du PIB dans l’Union européenne, augmentant le revenu disponible des ménages ainsi que marges bénéficiaires des entreprises.

: Poursuite de l’assouplissement de la politique monétaire

La Banque Centrale européenne a récemment annoncé le programme d’assouplissement quantitatif qui était largement anticipé.

La taille de ce programme excède les attentes des marchés et a conduit à une réaction très positive de leur part.

Les écarts de taux souverains en Europe se sont resserrés en particulier dans les pays dits périphériques, à l’exception de la Grèce.

Notre appréciation du programme de quantitative easing de la BCE est qu’il est suffisamment important pour avoir un impact macroéconomique substantiel.

L’effet positif sur la confiance et le crédit devrait soutenir l’investissement et la consommation. Cela devrait conduire à un retour progressif de l’inflation vers la cible fixee par la BCE.

Au total nous attendons une inflation en léger repli dans la zone euro en 2015 à -0,1%. En 2016 elle se redresserait à 1,3%. Au niveau de l’Union dans son ensemble la prévision est de 0,2% en 2015 et 1,6% en 2016.

: L’euro s’est déprécié face aux autres monnaies

L’euro s’est déprécié de façon significative vis à vis du dollar mais également vis à vis des autres principales devises.

Depuis novembre, la monnaie commune a perdu plus de 8% face au dollar. En termes effectifs, l’euro s’est déprécié: de plus de 5% depuis mars dernier.

La dépréciation de l’euro devrait avoir un impact positif sur la compétitivité des entreprises, et par conséquent soutenir les exportations. Elle devrait également contribuer à une normalisation plus rapide de l’inflation en 2016.

L’effet attendu n’est cependant pas le même en fonction des pays. Les pays qui ont de forts liens commerciaux avec la Russie par exemple, ont ainsi vu leur taux de change effectif s’apprécier en raison de l’effondrement du cours du rouble.


: Fiscal stance now neutral

After a substantial adjustment over the past few years, the aggregate fiscal policy stance in both the EU and the euro area is now neutral. This means that fiscal policy is neither tightening nor loosening and the drag of fiscal consolidation on growth is fading.

In the euro area, deficits are forecast to fall from 2.6% of GDP in 2014 to 2.2% this year and 1.9% in 2016.

In the EU as a whole, deficits area forecast to decline from 3% in 2014 to 2.6% this year and 2.2% in 2016.

These declines are happening against a backdrop of strengthening economic activity, cost-containment in public wages and lower interest expenditure.

: Upbeat signals in the bank lending

The repair of the European banking sector and the strengthening recovery are reflected in financial market conditions, which have further improved since the autumn.

Bank lending to the private sector continues to be weak in the euro area, but with notable signs of recovery. Banks now appear in a better position to support lending but high levels of non-performing loans remain a challenge in some Member States.

Further easing of credit standards and increased loan demand suggest that credit growth for non-financial corporations may turn positive in 2015.

: Global growth firming, but uneven across regions

After a slow start at the beginning of last year, global growth and world trade picked up in the second half of 2014 and are expected to accelerate moderately in 2015 and 2016.

Global growth is expected to be 3.3% in 2014 and to accelerate to 3.6% in 2015 and 4.0% in 2016.

Key drivers are:

  • a gradual recovery in advanced economies;
  • some rebound from recent weakness in emerging markets.

For commodity-exporting countries, the economic prospects have worsened, notably in Latin America, Russia, the Middle East and North Africa.

In parts of emerging Asia, the outlook has improved, notably in India and Indonesia.

The sharp drop in global oil prices will further increase regional differences as it implies a substantial redistribution of income from oil exporters to oil importers.

However, the overall impact on global output growth is set to be positive. As an oil importer, the EU will directly benefit from this redistribution.

: EU growth gradually improving

Turning to the EU, the outlook remains one of a modest recovery. Growth is set to gradually pick up speed as the impact of adverse factors on growth gradually fades.

Growth is expected to accelerate in the EU to 1.7% this year and 2.1% in 2016.

In the euro area, growth is expected to increase to 1.3% in 2015 and 1.9% in 2016.

This is of course welcome news. At the same time, it is important to retain the necessary sense of perspective. The underlying challenges facing the European economy have not disappeared.

: EU growth map 2015

For the first time since 2007, GDP is expected to grow in every country in the European Union this year. Growth is expected to be driven mainly by domestic demand. Nonetheless, diversity in economic performance is likely to persist.

Among the largest Member States, growth in 2015 is forecast to be dynamic in Poland (3.2%), the UK (2.6%) and Spain (2.3%), all well above the EU average.

Economic growth in Germany, at 1.5% in 2015, is expected to be close to the EU average, supported by domestic demand.

In France (1.0%), the economy is expected to slowly gain momentum in the next two years, primarily driven by household consumption.

In Italy, GDP growth is projected to turn positive early this year and reach 0.6% for 2015, on the back of growing external demand.

Among the euro-area Member States that had or have adjustment programmes, growth is expected to remain robust in Ireland (3.5%) and moderate in Portugal (1.6%), while in Cyprus, the economy is showing signs of stabilisation, with growth of 0.4%. For Greece, our forecast of 2.5% growth is based on an assumption of continued commitment to reforms and sound fiscal policies.

: Investment growth is set to pick up

Investment remains weak. It has been held back in most EU Member States:

  • by pressure to pay down debt in the corporate sector,
  • by fiscal constraints
  • by heightened economic and policy uncertainty.

Investment should however gradually benefit from

  • strengthening demand prospects,
  • diminishing needs for balance-sheet adjustment,
  • improved credit conditions and profit margins.

The Commission’s Investment Plan for Europe is also expected to have an increasingly positive impact and help to close the investment gap that has opened up since the beginning of the crisis.

: Unemployment slowly declining, but still high

We are seeing continued improvements in the labour market.

Employment growth in the EU has picked up despite still subdued output. This could reflect the impact of past wage moderation and the increased flexibility of the labour market as a consequence of reforms, notably in some vulnerable Member States.

The outlook for employment in the EU is only moderately positive for the next two years, since economic growth is expected to be insufficient for a marked improvement.

In 2015, employment growth is expected at 0.7% in the EU and 0.5% in the euro area and to accelerate in 2016.

The unemployment rate in the EU and the euro area is expected to decline to 9.3% and 10.6% respectively in 2016.

This steady reduction in unemployment is of course welcome. And it is of course not enough. These figures are still not acceptable.

Unemployment remains well above pre-crisis levels and the numbers remain dramatic in several countries. This reflects not only cyclical factors but also the persistence of high structural unemployment, demanding ongoing determined reform efforts.

: Significant differences in fiscal performance between countries

The fiscal stance in the EU and the euro area is broadly neutral.

Many euro-area Member States are expected to reduce their deficits in 2015.

Significant progress has been made in deficit reduction since 2013, when seven euro area Member States had deficits above 3% of GDP. According to our forecast, in the euro area only France, Spain and Portugal will post deficits above the 3% threshold this year.

For a number of non-euro area countries, deficits are set to widen this year mainly amid an expected loosening of their structural balances.

The debt-to-GDP ratio is expected to have peaked at around 88% in the EU in 2014 and to peak at 94% in the euro area in 2015, before declining as nominal growth picks up.

Today’s forecast will be the basiss for our assessment of compliance with the provisions of the Stability and Growth Pact for a number of Member States – namely Belgium, France and Italy – as indicated in November. However, this assessment will, as always, also look at all relevant factors. We will present this assessment at the end of February, on 27 February to be precise.

In parallel, we will be presenting our detailed analysis of all 28 Member States’ economic and budgetary policies – and, where relevant, macroeconomic imbalances – in the context of the European Semester.

: Risks to the growth outlook

The uncertainty surrounding these projections is substantial. Downside risks to the growth outlook have intensified since the autumn, but some new upside risks have also emerged recently.

Downside risks include:

  • geopolitical tensions,
  • the possibility of renewed financial market volatility,
  • and a delayed or incomplete implementation of structural reforms.

A protracted period of very low or negative inflation could hamper investment and debt reduction efforts, trapping the economy in persistently low growth.

However, there are also a number of factors on the upside that could lead to growth turning out stronger than forecast. For instance,

  • a larger than expected impact from the ECB’s unconventional monetary policy measures,
  • a faster-than-expected revival of investment through the Investment Plan for Europe,
  • a quicker-than-expected impact of structural reforms on labour markets,
  • a further depreciation of the euro, and
  • a stronger-than-expected boost to growth from low oil prices.

: European Growth Map 2015 (repeat – leave on screen)

Ladies and Gentlemen, let me conclude.

Europe’s economic outlook is a little brighter today than when we presented our last forecasts.

The fall in oil prices and the cheaper euro are providing a welcome shot in the arm for the EU economy.

Meanwhile, the Investment Plan for Europe and the ECB’s important recent decisions will help create a more supportive backdrop for reforms and smart fiscal policies.

But there is still much hard work ahead to deliver the jobs and investment the Europe needs.

That’s why all actors in Europe need to use all available tools to strengthen our economic fundamentals.

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