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Special> Global Financial Crisis> Impacts
UPDATED: November 4, 2008  
European Commission: Euro Aone Economy Headed for Recession

The euro zone economy is set to plunge into recession under the impact of the global financial crisis, the European Commission forecast Monday.

After growing 0.7 percent in the first quarter this year, the euro zone economy shrank 0.2 percent in the second quarter and is forecast to contract 0.1 percent in both the third and fourth quarters, it said.

For the 27-member European Union (EU), growth ground to a halt in the second quarter of 2008, and its economy will also contract by 0.1 percent in the next two quarters.

In technical terms, recession means negative growth in two consecutive quarters.

Annual economic growth for the EU will be 1.4 percent in 2008, half of that of 2007, and will drop even more sharply in 2009 to 0.2 percent before recovering gradually to 1.1 percent in 2010.

The annual growth rates for the euro zone were forecast at 1.2 percent in 2008, 0.1 percent in 2009 and 0.9 percent in 2010.

Among the biggest economies, Germany, France and Italy will see zero growth in 2009 while Spain's economy will contract by 0.2 percent. Britain, the biggest economy outside the euro zone, will witness a growth rate of -1.0 percent in 2009, according to the forecast.

The employment situation in EU countries will worsen as a result of the economic downturn, with euro zone unemployment expected to rise from this year's 7.6 percent to 8.4 percent and 8.7 percent in 2009 and 2010 respectively.

EU unemployment will rise from this year's 7.0 percent to 7.8 percent and 8.1 percent respectively.

However, inflationary pressure is expected to ease. Consumer price inflation is expected to fall rapidly to about 2.25 percent in 2009 and about 2 percent in 2010 in both the euro zone and the whole of EU.

In comparison, the commission forecast that the U.S. and Japanese economies will contract by 0.5 percent and 0.4 percent respectively in 2009 while emerging economies will continue to grow rapidly.

China's economy is forecast to grow at 7.9 percent and 8.8 percent in 2009 and 2010 while the rates for India are 6.7 percent and 7.0 percent respectively.

The world economy will grow by 3.7 percent in 2008, 2.3 percent in 2009 and 3.2 percent in 2010, predicted the commission, the executive body of the EU.

(Xinhua News Agency November 3, 2008)

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