He economic growth in the euro zone it will probably be this year bigger than expectedwhile the inflation will be lower than forecast towards the end of 2022, the European Commission said on Monday.
The executive arm of the EU said economic growth in the 20 countries that use the euro is likely to be 0.9% this year, instead of the 0.3% expected last November.
The single currency area will narrowly avoid the technical recession that the Commission forecast three months agosince growth in the last three months of 2022 was 0.1% quarter-on-quarter and the Commission forecasts a figure of 0.0% in the first three months of 2023.
The Commission stated that uncertainty around the forecast was high, but that risks to growth were broadly balanced.
“Domestic demand could be stronger than expected if recent declines in wholesale gas prices feed through to consumer prices more strongly and consumption proves more resilient,” he said.
“Nevertheless, a possible reversal of that decline cannot be ruled out” in the context of continuing geopolitical tensions.
The Commission noted that external demand could also prove more robust after the reopening of chinawhich could, however, fuel global inflation, noting that inflation risks were largely linked to developments in energy markets.
The inflation to consumption in the euro zone, which reached all-time highs of 10.6% last October due to the rise in energy and food prices caused by the Russian invasion of Ukraine, it will slow to 5.6% this year and 2.5% in 2024.
This would be a larger slowdown than previously expected of 6.1% for 2023 and 2.6% for 2024.
“This forecast crucially depends on the purely technical assumption that Russia’s aggression against Ukraine will not intensify.but will continue throughout the entire forecast horizon,” the Commission said.
Among the main economies of the euro area, Germany should close the year 2023 with an increase in GDP of 0.2%, with 0.6% in France and 0.8% in Italy. SpainMeanwhile, it projects solid growth of 1.4%.
Two weeks ago, the European statistics agency Eurostat had revealed that the EU was slightly moving away from the prospect of a recession that at the end of 2022 seemed imminent. However, the Commission noted that “Headwinds continue to be strong.”
According to Gentiloni, “Europeans still have a difficult period ahead” in which growth may slow down, while inflation will only gradually release its pressure.
“That is why we must show the same ambition as in the last three years to face the challenges we are facing now with common responses,” he said.
(With information from Reuters and AFP)
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