The forecast shows that GDP in the EU is now bottoming out and economic activity is gradually accelerating

The European Commission published its winter forecast 2012-14 that shows the contrast between the improved financial market situation and the muted macroeconomic prospects for 2013 is to a large extent due to the balance-sheet adjustment process, which continues to weigh on short-term growth.

Winter forecast 2012-14 published by the European Commission shows that the GDP in the EU is now bottoming out and the Commission expects economic activity to gradually accelerate. In addition, the Commission also highlights that while financial market conditions in the EU have improved substantially since last summer, economic activity was disappointing in the second half of 2012. The autumn forecast published by the European Commission in November 2012 showed that the GDP growth is set to contract in the EU and in the euro area in 2012.

On the other hand, the winter forecast also shows that a gradual pickup of consumption and investment expected. As the easing of financial market tensions is expected to feed through into better lending conditions, this should open the way for a gradual return of consumption and investment growth in the course of 2013. Moreover, the pick-up in growth will initially be driven by increasing external demand.

Winter forecast also shows that the sizeable fiscal measures that Member States are implementing should lead to another reduction of headline fiscal deficits to 3.4% in the EU and 2.8% in the euro area in 2013. The reduction of the structural budget balance is expected to advance at a slightly slower pace this year than in 2012.