European Commission about the development of the economic crisis

Many of the risks highlighted in the Commission's autumn 2008 forecast have already materialised by the time of this update. Nonetheless, the economic situation and outlook remains exceptionally uncertain as the world faces its worst crisis since the second world war. Downside risks to the outlook for economic activity relate, above all, to the impact of the financial crisis on confidence of economic agents and the real economy (including on the housing sector)and the strength of the negative feedback loop between the financial and real sectors of the economy. On the other hand, growth could be stronger than expected if inter alia the fiscal packages would restore confidence among investors and consumers more swiftly than assumed. Risks to the inflation outlook appear balanced following developments in commodity prices and the deterioration of economic prospects globally.