According to the spring forecast 2011-12, European recovery maintains momentum amid new risks. GDP is projected to grow by around 1,75% this year and by close to 2% in 2012. This outlook is supported by better prospects for the global economy and overall upbeat EU business sentiment.

The economic recovery in the EU continues to make headway, despite lingering vulnerabilities in financial markets and an external environment that has become more challenging. The recovery is broadening out and is projected to continue to do so in 2011. Equipment investment is set to accelerate markedly this year, supported by an upward revision of export growth. Construction investment, in contrast, will continue to contract reflecting the ongoing adjustments in several Member States. It is also worrying the inflation which is rising faster, reflecting the increase in commodity prices. Headline inflation is projected to average almost 3% in the EU and 2,5% in the Euro area this year, before easing to about 2% and 1,75% respectively in 2012. Meanwhile, labour-market conditions are expected to slowly improve over the forecast horizon.

With regard to private consumption is expected to pick up modestly this year in the EU, and its gradual recovery should be underpinned thereafter by slowly improving labour-market conditions, moderate income growth, and lower saving rates.

On the labour-market conditions are expected to slowly improve over the forecast horizon. The unemployment rate is projected to fall by ½ percentage point to a little over 9% and to 9,75% in the EU and the Euro area by 2012. Fiscal consolidation is progressing, with the public deficit set to decline to about 3,75% of GDP by 2012. However, the prospects continue to vary considerably for individual Member States.

Political changes in the Middle East and North Africa and the economic fallout of the earthquake and tsunami in Japan have heightened uncertainty and constitute downside risks to global economic activity, with the potential to lead to globally higher inflation and lower growth than incorporated in the baseline. On the upside, stronger-than-assumed global growth, as a result of stronger domestic demand in emerging markets, could further benefit EU export growth.