The future development of the emerging market countries, migration flows towards Europe and geopolitical conflicts pose considerable forecast risks. The influx of refugees will lead to higher public spending in the short term and provide a mild economic stimulus. In the medium to long term the economic impacts will depend on how the refugees are integrated into the labour market.
The unemployment rate is likely to fall slightly from 9.5 percent in 2015 to 9.0 percent this year. There remain large differences between the labour markets of the various Member States. While an unemployment rate of 4.9 percent is forecast for Germany, Greece and Spain are likely to be saddled with unemployment of 24.0 percent and 20.4 percent respectively.
ECB monetary policy remains expansive. The downward trend in prices has been successfully transformed into a modest rise. Fiscal policy is expected to remain largely neutral in 2016, with debt as a proportion of GDP falling slightly to 86.9 percent in the EU and 92.7 percent in the Euro area.