According to a report published yesterday by the European Union on economic forecasts for the candidate countries for Autumn 2001, the international environment has considerably deteriorated since the finalisation of the Commission's Spring 2001 forecast.

Economic growth in the EU in 2001 and 2002 has been revised markedly downwards from close to 3% to around 1½%. The growth deceleration in the EU Member States that are the most important trade partners of the candidate countries is expected to be more substantial.

The changed international outlook is expected to have mixed effects on the candidate countries. There are two main channels: (i) economic integration with the EU working through international trade, shifts in the allocation of production facilities and international capital flows; and (ii) terms-of-trade changes.

According to the report, employment will continue to contract in a number of candidate countries, but has been growing in Cyprus, Hungary, Malta and Slovenia. As a result, unemployment rates vary between under 5% in Cyprus and more than 18% in Bulgaria, Poland and Slovakia.