92001E0528

WRITTEN QUESTION E-0528/01

by José García-Margallo y Marfil (PPE-DE) to the Commission

(22 February 2001)

Subject: Economic forecasts

On 19 January 2001, Commissioner Solbes stated that oil prices are lower than expected, and the euro exchange rate has improved vis-à-vis the working hypotheses which were used by the Commission in November when drawing up its macroeconomic forecasts.

How and to what extent will these exchange rates affect the Community's macroeconomic fundamentals?

Answer given by Mr Solbes Mira on behalf of the Commission

(20 June 2001)

The Commission forecasts published on 22 November 2000 were based, among other things, on assumptions of an average oil price in 2001 of USD 30 per barrel Brent and a USD/ exchange rate of 0,90. So far in 2001 (up to 13 March) the oil price has been around 12 % lower and the USD/ rate 3 % higher than previously assumed.

These changes to the oil price and exchange rate are not particularly significant and within the normal range of volatility for these variables. If this situation were to prevail over the year, it would have a limited impact on the economic performance of the Community.

In particular:

- inflation should be lower than otherwise with unchanged exchange rates and oil prices. Only taking into account the direct impact on fuel prices (and disregarding possible secondary effects on other consumer prices), an easing of the harmonised consumer price index (HICP) rise of around 0,1 % to 0,2 % could be expected for 2001. The stronger euro would slightly reinforce this effect on headline inflation;

- as regards gross domestic product (GDP) growth, a lower oil price, on the one hand, stimulates real household incomes and business profitability and, thus, consumption and investment. On the other hand, a higher exchange rate weighs on the price competitiveness of exporters, and therefore lowers exports and growth. Hence, the net effect of the changed oil price and exchange rate on GDP growth in 2001 is, to some degree, uncertain.

The changes in oil prices and exchange rates are not the only new elements in the external environment for the Community economy. Most notably, the extent of the American slowdown since late last year was not fully visible at the time of the last Commission forecast.