990401

EU sees growth slowing sharply this year, rebound in 2000

BRUSSELS: Growth of the European economy will be sharply weaker this year than had been expected but will rebound to 2.7 percent next year, the European Commission forecast on Tuesday.

The euro-zone economy would grow by 2.2 percent this year instead of by 2.6 percent forecast by the commission in the autumn, and the economy of all 15 EU countries would grow this year by 2.1 percent instead of 2.4 percent.

But next year both the euro-zone and the EU would achieve growth of 2.7 percent, the Commission said in its spring forecasts.

The commission downgraded its forecast for growth in Germany from 2.2 percent to 1.7 percent, in France to 2.3 percent from 2.6 percent and in Italy to 1.6 percent from 2.1 percent.

The Commission saw an improvement in public deficits in the euro zone and of unemployment in the EU, but warned that inflation would rise in the euro zone and in the EU in 2000.

EU Monetary Affairs Commissioner Yves-Thibault de Silguy told the European parliament: "The slowing of growth will be limited and temporary.

"Negative factors in 1999 will be more than matched by positive factors" and this would lead to an increase of growth in 2000.

De Silguy said that one of the negative factors was a decline of 0.4 points in external demand and a slowing of investment in equipment.

But among positive factors this year were a 2.6-percent increase of private consumption, an increase of 1.7 percent of public consumption, a 3.5-percent increase of investment in construction and a "gradual recovery of the world economy."

The economy of the United States was expected to show growth of 2.7 percent this year, falling to 2.2 percent in 2000.

Ireland would continue to have the strongest growth in the euro zone, of 9.3 percent, followed by Finland with 3.7 percent, Spain 3.3 percent and Luxembourg and Portugal 3.2 percent.

But the Netherlands and Austria would achieve growth of 2.3 percent and Belgium 1.9 percent.

Outside the euro zone, Britain would achieve growth of 1.1 percent, Denmark 1.7 percent, Sweden 2.2 percent and Greece 3.4 percent.

Public deficits in the euro zone would continue to fall to 1.9 percent of output in 1999 and 1.7 percent in 2000 from 2.1 percent in 1998, the Commission said in its spring estimates.

Unemployment in all 15 EU countries was set to fall this year and next. The rate of unemployment would be 9.6 percent this year, from 10.0 percent in 1998, and 9.2 percent next year, and in the euro zone the rate would be 10.4 percent in 1999 and 9.9 percent in 2000.

In 1998 the EU economy had created 1.7 million jobs and was expected to create 2.5 million jobs in the next two years, to make a total of about 4.2 million from 1998 to 2000.

In 1998 the number of people employed in the EU had increased by 1.1 percent, or by the biggest amount since 1990, and this pattern should continue, but at a slower rate, for the next two years.

In the euro zone, inflation would be 1.2 percent this year and 1.5 percent in 2000, and in the EU it would be 1.3 percent this year from an estimated figure of 1.5 percent in 1998, and in 2000 it would rise slightly to 1.6 percent.ÑAFP