ECB SURVEY - economists cut euro zone 2004, 2005 growth forecasts UPDATE
Thursday, May 13, 2004 9:50:25 AM
FRANKFURT (AFX) - Economists surveyed by the European Central Bank cut their forecast for euro zone 2004 growth to 1.6 pct from 1.8 pct, the ECB said in its May monthly bulletin
Experts taking part in the ECB's Survey of Professional Forecasters (SPF) also cut their projection for 2005 growth to 2.1 pct from 2.2 pct
The economists left their 2004 inflation forecast unchanged at 1.8 pct, but raised their 2005 inflation forecast to 1.8 pct from 1.7 pct
The ECB said the downward revision in the 2004 and 2005 growth forecasts is the result of recent rises in commodity prices, past exchange rate developments, subdued domestic demand and uncertainty relating to structural reforms
"The main factors mentioned by respondents as supporting the growth outlook are, on the external side, the pick-up in global activity, and on the domestic side, an upswing in investment supported by improved profit developments and favourable financing conditions," the ECB said
In terms of the raised 2005 inflation forecast, the ECB said there had been a clear increase in the number of respondents citing commodity price rises as an upward factor
"Possible indirect tax and administered price increases, due to the worsening of fiscal balances in some countries, are also factors cited as exerting an upward influence on prices," it said. "Whilst past exchange rate movements are still mentioned as a downward factor, they are given less importance than in the previous round," the bank added
Notwithstanding the downward revisions to GDP growth, the ECB said SPF respondents' expectations for unemployment in 2004 and 2005 remain unchanged at 8.8 pct and 8.5 pct respectively. "The gradual nature of the expected pick-up in economic activity is the main factor cited as being behind the relatively slow decline in unemployment in 2004 and 2005," it said. "However, once the economic upswing gathers steam, respondents expect the cycle to be a stronger driving factor behind the decline in unemployment." The ECB said the expected rate of unemployment in 2008 stands at 7.5 pct, which represents a slight upward revision compared with the previous round's estimate of 7.4 pct. "Whilst some respondents cite labour market reforms as being behind the expected decline in unemployment over the longer-term horizon, a number of respondents are sceptical about the magnitude of future reforms," the ECB said
The ECB carried out its quarterly survey of experts from financial and non-financial institutions between April 16 and 26. The previous survey was conducted in January
fxstreet.com |
