The European Commission (EC) has downgraded its forecast for eurozone economic growth in 2023 to 0.8% from the previously expected 1.1%.
In 2024, eurozone GDP is expected to grow by 1.3% rather than 1.6%, the EC said in a review.
The forecast for EU economic growth for this year has been worsened to 0.8% from 1% and for next year to 1.4% from 1.7%.
“The latest statistical data confirm that economic activity in the EU has been subdued in the first half of 2023 due to the severe shocks facing countries in the region. Weakness in domestic demand, especially consumer spending, shows that high prices for most goods and services are putting more pressure on the economy than we believed in our previous forecast,” the survey said.
“The sharp contraction in bank lending suggests that monetary tightening in the euro area is having an impact on the economy,” the EC said. – Various surveys point to a slowdown in economic activity over the summer and the following months. Weakness in the industrial sector persists, and the impetus for growth in the services sector is weakening”.
EC experts emphasize that the situation in the world economy in the first half of the year was slightly better than expected, despite the weak dynamics in China. Nevertheless, the EC forecasts for the world economy and international trade volumes are practically unchanged, which means that European countries cannot count on support from external demand.
The EC expects global GDP to expand by 3.2% both this year and next year.
“The momentum towards slower growth in the EU is likely to continue into 2024, as tight monetary policy will continue to constrain economic activity. At the same time, we expect GDP growth to pick up slightly next year as inflation slows, the European labor market remains strong and household incomes gradually recover,” the EC review said.
The eurozone inflation forecast (HICP index) for this year has been lowered to 5.6% from 5.8%, for next year – raised to 2.9% from 2.8%. In the EU, according to the EC’s updated forecast, inflation will be 6.5% this year (previously 6.7%) and 3.2% next year (previously 3.1%).
The EC expects that energy prices in Europe will continue to decline until the end of 2023, but more slowly than before. At the same time in 2024 they may again slightly increase due to the expected rise in oil prices.
The EC review notes that the war in Ukraine and other geopolitical factors still carry risks for Europe.
In addition, experts warn that the tightening of monetary policy may put more pressure on the economy than expected at the moment. On the other hand, it may lead to a faster easing of inflation and, accordingly, accelerate the recovery of real incomes, the review notes.
According to the EC’s forecast, Germany’s GDP will contract by 0.4% in 2023 and grow by 1.1% next year. Previously expected to increase the first indicator by 0.2%, the second – by 1.4%.
France’s economic growth forecast for 2023 has been raised to 1% from 0.7%, for the next year it has been lowered to 1.2% from 1.4%.
Italy’s economy is expected to grow by 0.9% and 0.8% in 2023 and 2024 respectively, while Spain’s is expected to grow by 2.2% and 1.9%.
Experts Club Research Project and Maxim Urakin recently released an analytical video about the economy of Ukraine and the world.
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