The European Commission published its autumn forecast 2012-14 that shows, on annual basis, that GDP is set to contract by 0.3% in the EU and 0.4% in the euro area in 2012. GDP growth for 2013 is projected at 0.4% in the EU and 0.1% in the euro area. With regard to the government deficits, those are expected to fall to 3.6% in the EU and 3.3% in the euro area in 2012.

The autumn forecast 2012-14 published by the European Commission foresees a gradual return to GDP growth for 2013, with further strengthening in 2014, but the short-term outlook for the EU economy remains fragile. On an annual basis, GDP is set to contract by 0.3% in the EU and 0.4% in the euro area in 2012. GDP growth for 2013 is projected at 0.4% in the EU and 0.1% in the euro area. Unemployment in the EU is expected to remain very high. The Spring forecast 2012-13 showed a slow economy recovery from the second half of 2012 onwards.

After the contraction recorded in the second quarter of 2012, economic activity is not expected to recover before year end. The forecast also projects that the GDP growth in 2013 will be very modest before firming somewhat in 2014. Net exports are projected to continue contributing to growth. Domestic demand is expected to remain weak in 2013 and to pick up only in 2014, as it continues to be held back by the on-going deleveraging in some Member States and the reallocation of resources across sectors. This process is set to leave its mark on the labour market. Unemployment is expected to peak just below 11% in the EU and 12% in the euro area in 2013, though with large variations among Member States. Moreover, fiscal consolidation is progressing. Government deficits are expected to fall to 3.6% in the EU and 3.3% in the euro area in 2012. The available information from budgets for 2013 points to continued, though somewhat slower, consolidation with headline government deficits projected at 3.2% of GDP in the EU and 2.6% in the euro area.

The European Commission also highlights that the structural reforms undertaken should begin to bear fruit over the forecast period, while advancements in the EMU architecture continue to strengthen confidence. This should pave the way for a stronger and more evenly distributed expansion in 2014. GDP growth in 2014 is projected at 1.6% in the EU and 1.4% in the euro area. Nonetheless, confidence and future growth prospects would be affected if employment turned out worse than projected. On the other hand, in view of recent policy decisions, financial market stress in the EU may recede faster and confidence may rebound more strongly than expected, which would have a positive impact on domestic demand. Risks to the inflation outlook are broadly balanced.