The EU Economic Commissioner no longer expects a recession in the euro zone in 2023.
(Photo: dpa)
Brussels According to the EU Commission, Europe will avoid a recession this year. The economy in the euro zone is expected to grow by 0.9 percent in 2023, and growth of 0.8 percent is expected throughout the EU. At the same time, inflation is expected to fall to 5.6 percent in the euro zone and 6.4 percent in the EU.
The Brussels authority’s winter forecast is therefore significantly more favorable than the autumn forecast from last October. At that time, she had predicted a technical recession around the turn of the year.
“The EU seems to be avoiding a recession,” said EU Economic Commissioner Paolo Gentiloni on Monday in Brussels. The economy started 2023 on a more stable footing than expected. The threat of gas shortages has receded and unemployment remains at record lows.
Even Europe’s largest economy, Germany, can therefore avoid a recession. The Commission raised its growth forecast for the German economy to 0.2 percent this year, after forecasting a decline of 0.6 percent in the autumn. “This is a significant turning point,” Gentiloni said. The EU forecast corresponds to the expectations of the Federal Government (0.2 percent) and the International Monetary Fund (0.1 percent).
The situation on the energy market is less dramatic than feared due to the mild winter. European households and companies have also reduced their gas consumption by more than a fifth compared to the historical average. As a result, gas prices have fallen back to pre-Russian attack levels in Ukraine.
EU grew faster than USA and China in 2022
At the same time, the mood among companies is brightening. The latest surveys of purchasing managers indicate that the euro zone will grow in the first quarter. Inflation also seems to have peaked: the inflation rate has been falling for three months.
Gentiloni said the resilience of European businesses and households was “impressive”. He emphasized that the European economy grew 3.5 percent last year, despite the Ukraine war, faster than that of the USA and China – for the first time in decades.
This was mainly due to the different cycles of the corona pandemic. China’s economy has been slowed down by a long lockdown. Europe, on the other hand, experienced strong growth in the first half of the year following the end of restrictions, particularly a tourism boom in southern Europe. Spain, for example, recorded growth of 5.5 percent.
“Stubbornly high” inflation in Eastern Europe
Gentiloni named domestic demand as a possible growth driver for this year. This could rise further if lower gas prices feed through to retail prices. External demand could also increase if China’s economy picks up speed again after the end of the corona lockdown.
But risks remain. Uncertainty is high because of the war in Ukraine, said the EU Economic Commissioner. Inflation could also be higher than expected in 2024 if wages rise above average over a longer period of time. In the Eastern European countries, for example, the inflation rate is “stubbornly high”.
Gentiloni therefore warned that difficult times still lie ahead for the Europeans. “Better than expected doesn’t mean good,” he said. That’s why you need the political will to continue looking for common European answers.
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