Euro zone economic growth seen lower at 1.1% in 2014

Economic growth in the euro zone has been projected at around 1.1 per cent in 2014, with the pace accelerating to 1.5 per cent in 2015, slower than previously expected, as unemployment remains at unacceptable levels, the European Commission said in a report released on Tuesday.

The projection, which is slightly lower than the 1.2 per cent growth in gross domestic product (GDP) projected for the year 2014, in May, is based on lower private consumption and investment levels as well as inflation, which will stay well below the European Central Bank (ECB) target over the next two years.

Gross domestic product of the euro zone economy is projected to register a negative growth of 0.40 per cent in 2013, according to European commissioner for economic and monetary affairs, Olli Rehn.

"There are increasingly more signs that the European economy has reached the inflection point," Rehn said.

The European Union as a whole should end 2013 with GDP remaining unchanged and its 28 members posting growth of 1.4 per cent in 2014 and 1.9 per cent in 2015.

"The fiscal consolidation and structural reforms adopted in Europe have created the base for recovery," Rehn said.

Euro zone unemployment rate is expected to be 12.2 per cent in 2013 and 2014, with the jobless rate falling to 11.8 per cent in 2015, while the unemployment rate for the European Union as a whole is projected to be 11.1 per cent this year, falling slightly to 11 per cent in 2014 and 10.7 per cent in 2015.

Euro zone's aggregated budget deficit has been projected to fall from 3.1 per cent of GDP this year to 2.5 per cent in 2014 and 2.4 per cent in 2015, as consolidation continues although at a slower pace.

Government debt will peak at 95.9 per cent of GDP next year, up from 95.5 per cent this year and then fall to 95.4 per cent in 2015, the Commission said.

The Commission said inflation in the euro zone will be 1.5 per cent this year and next and only 1.4 per cent in 2015, against the ECB target of close to 2 per cent, as unemployment stays at record high levels around 12 per cent.