EC downgraded its forecast for eurozone GDP growth in 2023 to 0.6% y/y

Eurozone economy expected to grow by 1.2% in 2024

The European Commission (EC) has downgraded its forecast for eurozone economic growth in 2023 to 0.6% from the previously expected 0.8%. This is stated in the EC’s economic forecast.

In 2024, the eurozone’s GDP is expected to grow by 1.2% compared to 1.3% in the previous forecast.

Expectations for EU economic growth for the current year have also been downgraded to 0.6% from 0.8%, and for 2024 – to 1.3% from 1.4%.

In 2025, the European Commission expects GDP growth of 1.6% in the euro area and 1.7% in the EU. According to the agency’s expectations, the global economy will grow by 3.5% in 2023, by 3.2% – in 2024, and by 3.5% – in 2025.

«The European economy has lost growth momentum this year amid rising prices, weak external demand and tighter monetary policy,» the report said.

Inflation in Europe has slowed markedly from its peak levels, but remains high. High inflation and interest rates are having a more negative impact on the economy than previously expected, and recent statistics and surveys suggest that low levels of economic activity will also be observed in the fourth quarter of this year.

«Economic activity is expected to pick up slowly following a recovery in consumer spending and on the back of a strong and stable labor market, continued wage growth and lower inflation. Despite the tightening of the CAP, investment is expected to continue to grow thanks to strong financial performance in the corporate sector,» the EC said.

The inflation forecast for the euro area (HICP index) for the current year was left at 5.6%, and for the next year it was raised to 3.2% from 2.9%. In 2025, inflation is expected to fall to 2.2%.

In the EU, according to the EC’s forecast, inflation will be 6.5% this year, 3.5% next year (previously 3.2%), and 2.4% – in 2025.

«As the strengthening of the DCP increasingly affects the economy, inflation will continue to slow down, albeit at a weaker pace,» the EC expects.

The EU budget deficit is expected to reach 3.2% of GDP in 2023, compared to 3.3% a year earlier, and 2.8% of GDP – in 2024.

According to the EC’s forecast, Germany’s GDP will decline by 0.3% in 2023 and grow by 0.8% – next year. Previously, the first figure was expected to decline by 0.4% and the second by 1.1%.

France’s economic growth forecast for 2023 has been confirmed at 1%, and for the next year at 1.2%.

Italy’s economy is expected to grow by 0.7% and 0.9% in 2023 and 2024, respectively, and Spain’s by 2.4% and 1.7%.

As GMK Center reported earlier, in the third quarter of 2023 the GDP of the Eurozone has decreased by 0.1% compared to April-June 2023. Compared to the third quarter of 2022, the economy of the Eurozone grew by 0.1%. The economy of the European Union in the III quarter of 2023 grew by 0.1% q/q. In annual terms, EU GDP grew by 0.1%.