Roads to recovery: three skill and labour market scenarios for 2025

A cedefop briefing note

Cedefop’s latest skill demand and supply forecasts for the European Union (EU) extend the forecast period from 2020 to 2025. The forecast covers the 27 EU Member States plus Iceland, Norway and Switzerland, shown in the figures as EU-27+.

The three scenarios take account of global economic developments up to October 2012, the European Commission’s short-term macroeconomic forecast and the latest Eurostat population projections. The different assumptions of each scenario are set out below.

Baseline scenario:
a modest economic recovery slowly increases confidence. Credit is more easily available, helping investment and consumer spending to increase. Steadily rising demand outside Europe increases exports, and inflation remains within target range. Governments continue to reduce debt, but higher tax revenues relieve pressure to cut spending. Interest rates remain low. The baseline scenario is used for the forecasts’ main findings.

Optimistic scenario:
a speedier economic recovery, greater confidence and widespread bank lending increase investment and consumer spending. Strong economic recovery outside Europe benefits all sectors and boosts exports. Rising global demand increases inflation, but higher tax revenue makes it easier for governments to balance budgets, which eases pressure on interest rates.

Pessimistic scenario:
a prolonged economic slump lowers confidence. Limited access to credit and job insecurity depress investment and consumer spending. Global economic recovery is slow and export markets fragile. Subdued demand lowers inflation, but public debt problems persist, adding pressure to raise taxes and cut spending. Interest rates rise to avoid currency crises.

Full text (PDF 4pp)

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