Forecast: EU economy to enter 2024 weaker than expected

Photo: Xinhua/Zhao Dingzhe

BRUSSELS, Feb. 15 (Xinhua) -- The European Commission's winter interim forecast released on Thursday revised down European Union (EU) and eurozone growth to 0.5 percent in 2023 from 0.6 percent projected in the November autumn forecast. For 2024, EU economic growth is projected at 0.9 %, down from the autumn forecast of 1.3 %. Eurozone growth is revised down to 0.8 percent from the autumn forecast of 1.2 percent.

EU economic growth is expected to reach 0.9 percent in 2024, down from the autumn forecast of 1.3 percent. Eurozone growth is revised down to 0.8 % from the 1.2 % projected in the autumn.

"After a tough year in 2023, the European economy came out slightly weaker than expected, although the recovery should gradually pick up this year and in 2025," said Valdis Dombrovskis, Executive Vice-President of the Commission for an economy that works for people.

"Europe's economy has left behind an extremely challenging year in which the confluence of several factors has severely tested our resilience," said European Commissioner for the Economy Paolo Gentiloni.

These factors include a reduction in household purchasing power, a severe tightening of monetary policy, a partial withdrawal of fiscal support and a decline in external demand. The EU has almost avoided a recession at the end of 2023 and 2024 starts weaker than expected.

Economic growth should pick up in 2024, supported by falling inflation, rising real wages and a resilient labour market. Growth is forecast to stabilise in the second half of the year and continue to do so until the end of 2025.

"The expected recovery in 2024 is expected to be milder than projected three months ago, but to accelerate gradually thanks to slower price growth, rising real wages and an exceptionally strong labour market. Investment is expected to be sustained, helped by easy credit conditions and the flow of funds from the Recovery and Resilience Facility," Gentiloni said.

According to the Winter Economic Forecast, economic activity is still expected to grow by 1.7 % in the EU and 1.5 % in the euro area in 2025.

"In 2025, growth should firm up and inflation should fall close to the European Central Bank's 2% target," Gentiloni said.

In the EU, inflation is forecast to fall from 6.3% in 2023 to 3% in 2024 and to 2.5% in 2025.In the euro area, it is expected to slow from 5.4% in 2023 to 2.7% in 2024 and 2.2% in 2025.

"The global environment remains very uncertain. We are closely monitoring geopolitical tensions, which could have a negative impact on growth and inflation," Dombrovskis said.

These geopolitical tensions, especially in the Middle East and the Red Sea region, could have a slight impact on inflation. The forecast also faces risks related to consumption performance, wage and profit margin growth, the persistence and extent of the prevailing high interest rate environment and the impact of climate change, particularly extreme weather events.

Xinhua/gnews.cz-GeH_07