The report recently released by the European Commission provides an updated outlook for the European Union's economy. It shows that while the EU economy is set to avoid a recession, headwinds such as inflation and supply chain disruptions are expected to persist in the short term.
According to Paolo Gentiloni, Commissioner for Economy: “The EU economy beat expectations last year, and we have entered 2023 on a firmer footing than anticipated. Yet Europeans still face a difficult period ahead with slowing growth and only gradually easing inflation.”
The outlook for this year has improved due to positive developments since the Autumn Forecast, with the estimated annual growth rate for both the EU and the eurozone now at 3.5%. According to the report, both the EU and the eurozone are projected to experience, in 2023, growth rates of 0.8% and 0.9%, respectively, namely, a 0.5 and 0.6 percentage points increase compared to the Autumn Forecast. However, the growth rate for 2024 remains the same as before, at 1.6% and 1.5%. This being said, EU countries are expected to have uneven growth.
The report also notes that headline inflation is expected to decrease from 9.2% in 2022 to 6.4% in 2023 in the EU (5.6% in the eurozone). It only will get closer to the European Central Bank's target of 2% in 2024 (2.8% in the EU and 2,5% in the eurozone). The decline is due to several positive developments, such as, for example, the fall in energy consumption and the diversification of supply sources. However, a potential reversal is not excluded due to several factors, such as Russia’s invasion of Ukraine and other geopolitical tensions. Additionally, the reopening of China's economy may boost external demand, which could further fuel global inflation.
Overall, the Winter 2023 Economic Forecast provides a cautiously optimistic outlook for the EU's economy, with continued risks and uncertainties in the short term. Despite these circumstances and the successive crisis, the report notes that both households and companies across the European Union have demonstrated strong resilience in challenging times.
The EU's winter 2023 economic forecast is crucial for policymakers, businesses, and investors. It provides an in-depth analysis of economic trends in the EU, including GDP growth, inflation, employment, public finances, and trade. It doesn’t only highlight key risks and challenges facing the EU economy, but also offers recommendations to address them.