The European economy should post lower inflation and better-than-expected growth this year, after avoiding a recession this winter despite the war in Ukraine, the European Commission announced Monday. The European executive has announced that it is revising its growth forecast for the euro zone in 2023 upwards to 0.9% (+0.6 points) and estimates that it should “narrowly avoid” a recession this winter.
The same trend for the EU as a whole, whose growth is now announced at 0.8% (+0.5 points). These figures mark a sharp slowdown from the 3.5% growth recorded last year in both the EU and the Eurozone. But the economy is withstanding the consequences of the war in Ukraine better than expected. “Despite exceptional shocks”, the European economy avoided a contraction of Gross Domestic Product (GDP) in the last quarter of 2022.
Inflation lower than expected
The European Commission has also lowered its inflation forecast for the euro zone in 2023 to 5.6% (-0.5 points) and estimates that the peak has already been exceeded thanks to the slowdown in energy prices. Brussels expects a slightly higher figure for the EU as a whole with a rise in consumer prices of 6.4% in 2023, 0.6 points below what was expected so far. Inflation has fallen for three consecutive months, after reaching a record high of 10.6% in October, which “suggests that the peak is behind us,” stressed the European executive.
However, “the headwinds remain strong,” warns Brussels. Homes and businesses continue to face high energy prices. Monetary policy should remain “tighter” as inflationary pressures persist, which should “weigh on business activity and drag on investment.” The European Commission also warned that uncertainty around the forecast was “high” amid ongoing geopolitical tensions.
Source: BFM TV
