The European Commission's autumn economic indicators underline fears of a painful economic downturn, predicting that UK growth will slow to 1.3 per cent in 1999. That represents a drop of 0.9 per cent from the Commission's spring forecast. And this year's performance will see Britain slump to near the bottom of the league table of economic growth, outperforming only Italy and Denmark.
All European Union growth figures for 1999 have been revised downwards, with the Commission blaming "the marked deterioration in the external environment". But Brussels believes the British economy will have the hardest landing in 1999.
Although the Commission does not give its reasoning for this prediction, it points out that the countries joining the single currency are enjoying low interest rates as well as low inflation.
The paper, presented by Yves-Thibault de Silguy, commissioner for economic, financial and monetary affairs, argues: "The member states benefiting most from the decline in interest rates and inflation thanks to their participation in Emu [Spain, Ireland, Portugal] will best resist the slowdown and continue to enjoy growth rates above 3.5 per cent, while growth in Italy is set to accelerate to 2.1 per cent."
Average growth rates for next year are expected to be 2.4 per cent in the EU and 2.6 per cent in the single currency zone - although Ireland will exceed 8 per cent growth.
In a statement Mr de Silguy conceded that the economic turbulence in Asia and Russia has slowed world growth and international trade and posed several threats to the economic outlook, as the EU prepares to launch the single currency.
The downward revision of growth forecasts reflect "progressively weaker external demand for EU exports" and the decline in the value of the dollar, which "if maintained, will erode the competitive position of EU exporters", according to the Commission. It also points out the threat to investor confidence from stock market volatility.
But despite the gloom about the impact of the world financial crises, the Commission is bullish about the EU's ability to avoid recession.
The slowdown next year will be corrected in most countries in 2000, by when growth in Britain will reach 2.1 per cent, the Commission believes - 0.7 per cent lower than the EU average.
Mr de Silguy's statement argues: "The forecasts also indicate a welcome improvement in the employment situation in Europe with the creation of 1.7 million jobs in 1998 and 1.3 million in 1999. Overall, the EU economy is expected to outperform the other major industrialised economies of the world throughout the forecast period."
Britain's jobless total is expected to fall marginally from 6.3 per cent this year to 6.2 per cent next. That compares favourably with the European average of 10 per cent or 11 per cent for the euro-11 zone.Reuse content