The European Union (EU) Commission lowered its forecast for economic growth in the Eurozone this year to 0.8 percent as purchasing power weakened and high interest rates reduced lending.
The EU Commission’s “European Economic Forecasts Winter 2023” report was published.
In the report titled “Delayed recovery in growth with declining inflation”, it was predicted that the EU economy will grow by 0.5 percent in 2023, 0.9 percent in 2024 and 1.7 percent in 2025, while the Eurozone economy will grow by 0.5 percent in 2023 and 0.8 percent in 2024 and 1.5 percent in 2025.
In the previous “Autumn” report of the EU Commission, it was estimated that the EU would grow by 0.6 percent in 2023, 1.3 percent in 2024 and 1.7 percent in 2025, while the Eurozone would grow by 0.6 percent in 2023, 1.2 percent in 2024 and 1.6 percent in 2025.
With the latest report, the growth forecasts for the EU and the Eurozone were revised downwards. Thus, the Eurozone growth forecast for this year was reduced from 1.2 percent to 0.8 percent.
In the report, it is estimated that Germany will grow by 0.3 percent this year and 1.2 percent next year, France will grow by 0.9 percent this year and 1.3 percent next year, Italy will grow by 0.7 percent this year and 1.2 percent next year, Spain will grow by 1.7 percent this year and 2 percent next year.
11 EU countries contracted
In the report, it was pointed out that the economies of 11 EU member countries shrank in 2023, Estonia by 3.5 percent, Ireland by 1.9 percent, Hungary and Luxembourg by 0.8 percent, Austria by 0.7 percent, Latvia by 0.6 percent, Finland and Czechia by 0.4 percent, Germany and Lithuania by 0.3 percent and Sweden by 0.1 percent.
This year, Germany is expected to grow by 0.3 percent, France by 0.9 percent, Italy by 0.7 percent and Spain by 1.7 percent.
In the report, which stated that inflation was 6.3 percent in the EU and 5.4 percent in the Eurozone last year, it was predicted that inflation would decline to 3 percent in the EU and 2.7 percent in the Eurozone this year, and that inflation would be 2.5 percent in the EU and 2.2 percent in the Eurozone in 2025.
In the report, it was stated that the EU economy entered 2024 at a weaker level than expected after last year’s weak growth, and it was emphasized that growth in both the EU and the Eurozone was revised downwards for this year.
“Red Sea effect marginal”
In 2023, growth remained low due to weakening household purchasing power, strong monetary tightening, partial withdrawal of fiscal support and falling external demand, the report pointed out, adding that the technical recession was narrowly avoided in the second half of last year, but growth will regain momentum in 2024.
“This forecast is surrounded by
uncertainty due to protracted geopolitical tensions and the risk of further expansion of the conflict in the Middle East,” the report said, pointing to increased uncertainty amid geopolitical tensions.
“The increase in transportation costs following the disruptions in the Red Sea trade is expected to have only a marginal impact on inflation,” the report reminded, adding that further disruptions could damage production and cause new supply bottlenecks that could push prices higher.
