The fall in energy prices registered in recent months and the good performance of the European labor market led to a “surprise” economic growth in the second half of 2022, which allowed the Eurozone to “narrowly” avoid the recession that the European Commission predicted just a few months ago.
Eurozone economic growth is likely to be higher than forecast this year, while inflation will be lower than forecasts made at the end of 2022, according to the European Commission.
The executive arm of the European Union said that economic growth in the 20 countries that use the euro would likely be 0.9% this year, instead of the 0.3% expected last November.
The euro zone finance and economy ministers discussed these economic prospects during a meeting on Monday, against a backdrop of very low unemployment that was barely affected by the slowdown in growth at the end of 2022.
“Employment in the euro zone has been incredibly resilient in the face of the economic consequences of the war,” said the chairman of the euro zone finance ministers, Paschal Donohoe, at the entrance to the ministers’ talks.
Unemployment in the Eurozone was 6.6% in December 2022, unchanged from November and below 7.0% a year earlier. “Taken together, these forecasts point to a euro zone that has remained resilient, despite the incredible economic shocks of recent years,” Donohoe added.
dodge the recession
The Commission stated that despite earlier concerns, the single currency area would narrowly avoid a technical recession, as growth in the last three months of 2022 was 0.1% qoq and likely to be 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 the recent declines in wholesale gas prices pass through more strongly to consumer prices and consumption proves more resilient,” he said.
“However, a possible reversal of that decline cannot be ruled out in the context of continuing geopolitical tensions,” it added.
The Commission says that foreign demand could also prove more robust after the reopening of China, which could, however, fuel global inflation. Eurozone consumer inflation, which reached a record high of 10.6% last October due to the rise in energy and food prices triggered by the Russian invasion of Ukraine, is expected to slow to 5.6% this year and 2.5% in 2024.