European Commission to cut eurozone growth forecast

The European Commission at its next meeting in November will lower its 2005 eurozone growth forecast in the face of high oil prices, European Economic and Monetary Affairs commissioner Joaquin Almunia said here Friday.

"We will offer a growth rate below 1.6 per cent for the eurozone but with a good evolution and a positive impact looking to the next year 2006," he told a news conference.

The commission, the executive arm of the European Union, in April forecast growth of 1.6 per cent this year for the 12 eurozone economies. "Since then (April), oil prices have increased and, of course, this increase in oil prices is having a negative impact on growth," Almunia said.

But he added that strong growth rates elsewhere, particularly in emerging economies such as China and India, would help lift eurozone momentum in the second half of 2005.

"We think that at the end of the year the European economy will have increased the growth rate in the fourth quarter because we have good conditions, the world economy is growing fast, not so fast as last year but it is growing fast," he said.

"The emerging countries' economies continue to grow, close to 10 per cent in the case of China, around seven to eight per cent in the case of India. "New member-states in the European Union have growth rates well above the average of the EU.

"So I'm not pessimistic, I think we have some downside risk because of the oil price evolution but at the same time we are having other positive indicators," he said.

Oil prices reached a record-high of 70.85 dollars a barrel on August 30 after Hurricane Katrina struck Gulf of Mexico oil supplies in the southern United States.