Euro zone expects 1.6% growth

Euro zone expects 1.6% growth

An 85% increase in oil prices during the last 12 months, a regional unemployment rate of 8.9% and a drop in customer confidence led the European Commission (EC) to revise its Euro zone growth forecasts for the second time in the last six months. The EC downgraded projected 2005 growth from 2% to 1.6%. Furthermore, it revised the 2006 figures from 2.2% to 2.1%. Growth was 2% in 2004. The budget deficits of Germany, Italy, Greece and Portugal are expected to surpass the European Union (EU) limit of 3% of gross domestic product due to high unemployment and a strong euro. Germany, with 0.8% projected growth, is expected to show the worst economic performance in the Euro zone and EU. For the EU, Latvia, with a projected growth of 7.2%, is expected to be the best performer. Elsewhere, the EC forecasts 3.6% growth for the US in 2005.