The European Commission (EC) has downgraded its forecast for the European Union’s economic growth in 2024 to 0.9% from the previously expected 1%. The forecast for the eurozone’s GDP growth this year remains at 0.8%. In 2025, the European Commission expects the eurozone’s GDP to grow by 1.3% and the EU’s by 1.5%. The May forecast envisaged a rise of 1.4% and 1.6%, respectively. In 2026, the eurozone’s economic growth rate will accelerate to 1.6%, and the EU’s – to 1.8%, the regulator predicts.
“After a long and widespread stagnation, the EU economy returned to growth in the first quarter of this year. As expected in the spring, moderate but steady growth rates continued in the second and third quarters amid further easing inflationary pressures. The prevailing conditions point to a moderate acceleration in domestic demand, despite heightened uncertainty,” the press release said.
According to the EC’s forecast, inflation (HICP index) in the euro area will slow to 2.4% this year from 5.4% in 2023 and weaken to 2.1% in 2025. In May, inflation rates were forecast at 2.5% and 2.1%, respectively. In 2026, consumer prices are expected to grow by 1.9% in the euro area and by 2% in the EU.
“Household disposable income continued to grow at a good pace in the first half of the year, driven by increased employment and the ongoing recovery in real wages,” the report says.
At the same time, the situation with investments was disappointing, as the indicator decreased by more than 2.5% in the first half of the year. The European Commission called increased uncertainty the main negative factor for both consumer spending and business investment.
Unemployment in the eurozone is expected to reach 6.5% this year and drop to 6.3% next year, remaining at this level until 2026. In the EU, unemployment is expected to decline to 5.9% in 2025 and 2026 from 6.1% in 2024.
In 2024, the budget deficit in the EU countries may shrink to 3.1% of GDP from 3.6% of GDP a year earlier, and in the eurozone countries – to 3%. In 2025, the figures will drop to 3% and 2.9%, respectively, and in 2026 – to 2.9% and 2.8%, the EC predicts.
The ratio of total public debt to GDP in the European Union is expected to increase to 83.4% by 2026 from 82.1% in 2023.
Germany’s economy, according to the EC’s forecast, will shrink by 0.1% this year and grow by 0.7% next year. France’s GDP is expected to grow by 1.1% and 0.8%, respectively, Italy’s by 0.7% and 1%, and Spain’s by 3% and 2.3%.
“The economic outlook for the EU remains extremely uncertain, and the risks are largely shifted downward,” the European Commission said in a statement.
These risks include geopolitical risks, in particular those related to Russia’s military aggression in Ukraine and the conflict in the Middle East, as well as foreign trade risks related to possible “protectionist measures by trading partners.” The EC also points to the risks of weak labor productivity growth and the danger of large-scale natural disasters.
The European Commission has disbursed almost EUR 4.2 billion to Ukraine under the Ukraine Facility, bringing the total amount of EU funding allocated to the Ukrainian government under the Ukraine Facility to EUR 12 billion.
This was reported by the European Commission on Tuesday.
“Following a request for disbursement submitted by Ukraine, the Council endorsed the Commission’s assessment that Ukraine has satisfactorily implemented nine reform indicators related to the first regular quarterly payment. These conditions, covering public financial management, management of state-owned enterprises, business environment, energy and demining, were set out in the Plan for Ukraine,” the press release said.
The EC noted that today’s payment follows the initial disbursements made under the Ukraine Facility, namely €6 billion in bridge financing and €1.9 billion in pre-financing, and is evidence of the rapid implementation of the Ukraine Plan.
The European Commission expects Kyiv to fulfill the conditions agreed upon earlier and the European Council to approve the Ukraine Plan, which will allow it to disburse another EUR1.5 billion in April and EUR1.9 billion in May under the Ukraine Facility, said Valdis Dombrovskis, the European Commission’s executive vice president.
“The next disbursement (for the Ukraine Facility) of EUR1.5 billion is scheduled for this month, if the policy conditions are met,” he said in a press statement following the meeting of the EU Council of Ministers (ECOFIN) held on April 12 in Luxembourg.
According to Dombrovskis, the European Commission is currently assessing Ukraine’s plan to draw up quarterly indicators of reforms and investments that need to be made to unlock future disbursements.
“In the near future we will finalize this work and submit the assessment to the (European) Council. Once the approval is received, it will pave the way for Ukraine to receive the pre-financing of EUR1.9 billion, most likely in May,” the Executive Vice President said.
He emphasized that the EUR50 billion Ukraine Facility until 2027 is a lifeline from the EU at an extremely difficult time to help Ukraine maintain key public services and keep the state functioning while Russia wages a brutal war, and recalled that the first tranche of EUR4.5 billion in transitional financing was disbursed in March.
Speaking about the Ukraine Plan, Dombrovskis noted that it will be the main instrument for the implementation of the Ukraine Facility, and it focuses on structural reforms to remove barriers to growth, investments in key sectors, and measures to facilitate Ukraine’s convergence with EU rules and standards as part of its accession path.
As reported, Ukraine expects to receive a total of EUR 2024 billion under the Ukraine Facility, with a total need for external financing of this year’s budget deficit of EUR 37.3 billion.
European Union High Representative for Foreign Affairs and Security Policy Josep Borrell says that the European Commission has paid the first EUR4.5bn from the Ukrainian fund totaling EUR50bn.
He made the announcement on Wednesday in Brussels at a press conference at the end of the EU-Ukraine Association Council.
“Today we made the first disbursement of EUR4.5bn from the EUR50bn Ukrainian Aid Fund to support Ukraine’s recovery, reconstruction and modernization. Tomorrow the European Council will discuss how to further accelerate Ukraine’s accession (to the EU),” Borrell said.
German Chancellor Olaf Scholz is optimistic on the allocation of EUR50 billion for Ukraine, Reuters reports.
“We have other ways to help Ukraine, but we have not given up the goal of finding a solution here,” Scholz said.
German Chancellor and French President Emmanuel Macron hope that Ukraine will receive help from the EU.
As reported, an extraordinary meeting of the European Council, which is to decide on the revision of the EU budget, as well as on the continuation of EUR50bn funding for Ukraine until 2027, will be held at the end of January-February, but there is no specific date yet. At the same time, the European Commission intends to work on a contingency plan that will make it possible to do so.
On Sunday, the European Commission called on Poland, Hungary and Slovakia to be constructive after they unilaterally announced that they would extend the ban on grain imports from Ukraine despite the Commission’s decision to end the ban, Reuters reports, citing a European Commission spokesman.
“We are aware of statements by some member states regarding unilateral measures. It is now important that all countries work in a spirit of compromise and engage in constructive cooperation,” the Commission spokeswoman said.
According to her, Brussels is now focused on “putting in place and making work the new system that has just been announced.”
In particular, Reuters reports that a meeting with representatives of all interested EU countries will be held on Monday to discuss the issue of Ukrainian grain imports in more detail.
The news agency notes that Ukraine was one of the world’s leading grain exporters before Russia’s invasion in 2022 reduced its ability to deliver agricultural products to world markets through Black Sea ports. Since then, Ukrainian farmers have relied on grain exports through neighboring countries.
However, the influx of grains and oilseeds to neighboring countries has affected the incomes of local farmers and led governments to ban imports of agricultural products from Ukraine.
As reported, the ban on the export of wheat, barley, rapeseed and sunflower seeds from Ukraine to Poland, Hungary, Slovakia, Romania and Bulgaria, introduced on May 2 for the period until June 5, was extended until September 15.
On Friday, September 15, the EU allowed the ban to be lifted after Ukraine promised to take measures to tighten export controls to neighboring countries.
