The European Commission today estimated euro-zone economic growth at a sharply declining 1.6 per cent for 2001 from 3.4 last year, and forecast a further dip to an average 1.3 per cent in 2002 but said there would be a mid-year rise.
"The degree of uncertainty surrounding the outlook is unusually high, not in the least because of the terrorist attack in the US on September 11th," it said.
"However, all major regions of the world were experiencing a growth slowdown already before the attack," it added, citing the burst of the dot.com bubble, halt in global trade growth and the effects of interest rate hikes following the 1999-2000 oil price increases.
"The euro area economy is likely to face a very weak year end and to grow at only 1.6 per cent this year on average, notwithstanding a gradual recovery in 2002 which will gain steam through 2003," the commission said in its autumn three-year economic forecasts.
"Next year's growth performance is not expected to be better on average," the report added.
Economic growth in the full 15-member EU was estimated at 1.7 per cent, down from 3.3 per cent last year, and forecast to rise by only 1.4 per cent next year, said the commission.
"Economic growth in the EU has been decelerating in 2001, but will rebound in 2002," said the report.
"After the 1999-2000 oil price hike, a sudden increase in food prices in the first half of 2001 gave a boost to inflation that eroded the purchasing power of households and private consumption," it said.
The Commission said that the eurozone estimated unemployment rate dropped this year for the first time since 1997 to 8.3 per cent from 8.9 per cent last year, but forecast a rise to 8.6 per cent in 2002.
"Employment creation is expected to be less buoyant over the forecast horizon," the commission said in its autumn three-year economic forecasts.
The Commission said it estimated 2001 euro-zone inflation was 2.8 per cent, up from last year's 2.4 per cent, and forecast it would drop to 1.8 per cent next year.
AFP