Business Cycle Recovery Gaining Shape. Economic Outlook for 2004 and 2005

With economic activity picking up, growth of real GDP is set to accelerate from 0.7 percent in 2003 to 1.7 percent in 2004, supported by exports, manufacturing output and business investment in machinery and equipment. In the last few months, global economic conditions for a cyclical upturn have improved markedly. Certain risks remain, however, such as the sizeable appreciation of the euro that could put a brake on the recovery. The outlook for 2005, with a projected growth rate of 2½ percent is therefore still surrounded by a margin of uncertainty. Contrary to the experience with previous episodes, the strengthening of growth will not lead to a turnaround on the labour market. The rate of unemployment will remain at 4.5 percent of the labour force, due to a strong increase in foreign labour supply.