EU shrugs off recession, says economy will grow 0.8% this year

February 13 (United Press International) — The European Commission said on Monday that the EU economy is likely to avoid recession, while headwinds from high energy costs and inflation will limit the recovery going forward.

The EU economy is on track to grow at 0.8 percent, while growth in the euro zone — the 20 economies that use the euro — is expected to be slightly above 0.9 percent, the bloc said in its report Winter 2023 Economic Forecast.

advertise

EU Economic Commissioner Paolo Gentiloni said: “Growth at the end of last year was better than previously expected, and the improvement in economic sentiment suggests that the EU economy will therefore barely emerge from the technical recession forecast in the autumn.” in the notes on Monday.

However, these performances are significantly lower than forecasts for 2022, which show growth projected at 3.5%. GDP growth is also capped at 1.6% in 2024 and 1.5% in the euro area, partly due to concerns over the war in Ukraine and inflationary pressures.

The European economy was previously expected to fall into recession due to an “exceptional adverse shock”, but the economic contraction was avoided by diversifying sources of energy supply and falling consumption, and natural gas storage levels stabilized above the seasonal average, pushing up wholesale gas prices. below pre-war levels.

In addition, the EU labor market continues to perform strongly, with the unemployment rate remaining at a historically low 6.1% until the end of 2022.

Confidence is improving, with January surveys suggesting economic activity will also avoid a contraction in the first quarter of 2023, the report said.

“Despite the shockwaves of Russia’s war of aggression, the EU economy exceeded expectations last year with strong growth,” Gentiloni said.

“We enter 2023 on stronger ground than expected: the risks of recession and gas shortages have receded, and unemployment remains historically low. However, Europeans still face difficult times ahead.”

Gentiloni said growth was still expected to slow due to strong headwinds, while inflation would only gradually relinquish its grip on purchasing power over the next few quarters.

However, he said the EU had weathered the storm that had hit its economy and society since 2020 thanks to a “coherent and comprehensive policy response”.

Valdis Dombrovskis, executive vice president for economics for the people, said he was more optimistic about the growth outlook for this year and the expected decline in inflation.

“We still face multiple challenges, so now is not the time to be complacent — especially as Russia’s relentless war on Ukraine continues to create uncertainty,” Dombrowskis said. “We are determined to improve our industrial competitiveness in order to strengthen overall growth and resilience. In light of all geopolitical changes and risks, it is vital to maintain the EU’s position as a major global economy.”

The EU’s inflation outlook has been revised down slightly, with headline inflation forecast falling from 9.2% in 2022 to 6.4% in 2023 and continuing to decline to 2.8% in 2024. Inflation in the euro zone is expected to fall to 5.6% this year, from 8.4% last year to 2.5% next year.

The forecast was in line with another report two weeks ago that showed annual inflation in the euro zone continued on a downward trajectory.

preliminary data Inflation fell in the 19 countries that use the euro in December, the pace of price increases slowed for the third consecutive month, Eurostat, from Eurostat, showed. Croatia became the 20th eurozone country to use the euro on January 1.

It fell nearly three-quarters of a percentage point to 8.5 percent from 9.2 percent in December, the third straight month of inflation in the 20 countries that use the euro and the lowest inflation rate since June.