Eurozone Economy To Undergo Moderate Recovery After Challenging Year: EU

The euro area economy is expected to recover only moderately after a challenging year during which growth was damped by weak consumption and subdued foreign demand, the European Commission said in its Autumn Economic Forecast, released Wednesday.

The EU forecast the 20-nation currency bloc to grow by a modest 0.6 percent in 2023, which is less than the 0.8 percent estimated previously.

Going forward, economic growth is set to rebound mildly as consumption recovers with increasing real wages, the European Commission said. Investment will remain supportive and external demand will pick up.

GDP growth is forecast to be slightly lower next year at 1.2 percent, and 1.6 percent in 2025. The projection for 2024 was downgraded from 1.3 percent.

Total investment spending is forecast to grow steadily over the forecast horizon.

Inflation is projected to continue to ease over the forecast horizon. In the euro area, inflation is set to fall from 5.6 percent in 2023 to 3.2 percent in 2024 and 2.2 percent in 2025, the EU said.

The inflation projection for this year was left unchanged, while the outlook for 2024 was lifted from 2.9 percent.

The EU expects the largest euro area economy, Germany, to contact 0.3 percent in 2023, before rebounding 0.8 percent next year and 1.2 percent in 2025.

Domestic demand and investment are expected to contribute to the German growth next year, while net trade is likely to make neutral contribution.

France’s GDP growth is projected to slowly increase over the forecast horizon as private consumption resumes and inflation slows progressively.

The French economy is expected to expand 1.0 percent in this year, 1.2 percent next year and 1.4 percent in 2025.

Italy’s economy is forecast to climb 0.7 percent this year. In 2024, growth is projected to rise to 0.9 percent driven by private consumption, investment and net trade. Growth is seen at 1.2 percent in 2025.

Among big-four, Spain is forecast to outperform other economies. Growth in 2023 is projected to be 2.4 percent and 1.7 percent in 2024 and 2.0 percent in 2025.

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