EC downgrades EU’s GDP growth expectations

The European Commission forecasts a 1.3-percent real GDP growth for the European Union, 0.3 percentage points below the spring forecast. At the same time, 0.8 percent real GDP growth is forecast for the euro area, compared with 1.2 percent forecast in spring. The European Union’s real GDP growth is expected to stand at 1.5 in 2015, while the euro area’s at 1.1 percent.

According to the report, geopolitical tensions stemming from the Russia-Ukraine events have dampened consumer and business sentiment as well as exports. As a consequence, Lithuania’s real GDP growth is set to decrease in the second half of the year, resulting in an overall growth rate of 2.7 percent in 2014 as a whole.

Lithuania’s Inflation is forecast to stand at 0.3 percent in 2014, 1.3 percent in 2015 and 1.6 percent in 2016. Meanwhile the unemployment rate is set to continue declining, from 11.2 percent in 2014, to 10.4 percent in 2015, and 9.5 percent in 2016.

In addition, in 2014, the general government deficit is forecast to decrease to 1.2 percent of GDP, from 2.6 percent in 2013. In 2015, it is forecast to reach 1.4 percent of GDP, and in 2016 – 0.8 percent of GDP.

The structural deficit is estimated to decrease from 2.2 percent of GDP in 2013 to 1.8 percent in 2014. It is set to fall further to 1.6 percent in 2015 and to 1.1 percent of GDP in 2016.

General government debt is expected to increase from 39.0 percent of GDP in 2013 to 41.3 percent in 2014 and 41.6 percent in 2015, due to pre-financing bond redemptions, and fall back to 41.3 percent in 2016.