The consequences of the Russian war of aggression against Ukraine have weighed heavily on the EU economy. But it probably won’t be as bleak as it looked in the meantime.
According to a forecast by the EU Commission, the economy in the EU will be more stable this year than initially expected. The Brussels authorities are now assuming growth of 0.8 percent for the EU and 0.9 percent for the euro states, as EU Economic Commissioner Paolo Gentiloni said. The Commission has thus raised its expectations by 0.5 and 0.6 percentage points, respectively, compared to the autumn. Accordingly, there will be no recession in either the EU or the euro zone. Things are looking better for Germany too.
In an EU-wide comparison, Germany has one of the lowest growth rates. Only for five EU countries is growth predicted for the current year to be even lower than the 0.2 percent expected for Germany. As Gentiloni emphasized, however, it had previously been expected that the economy in Germany would shrink by 0.6 percent.
The economy is likely to develop best in Ireland, with growth of 4.9 percent. Malta is second with 3.1 percent, Romania third with 2.5 percent.
Expected growth rate for 2024 unchanged
The expected growth rate for 2024 remains unchanged at 1.6 percent for the EU and 1.5 percent for the euro area. Well-stocked gas storage facilities, lower consumption and more gas suppliers are given as reasons for the development. In addition, things are still going well on the job market. At 6.1 percent, the unemployment rate is still lower than ever.
The figures are also improving when it comes to inflation. Headline inflation in the eurozone is expected to fall from 8.4 percent in 2022 to 5.6 percent this year. 2.5 percent is expected for 2024. In October, inflation was reportedly still at an all-time high of 10.6 percent.
Gentiloni also stressed: “But the Europeans are still facing difficult times.” Energy costs for consumers and businesses are still high, and core inflation – that is, inflation excluding energy prices and unprocessed food costs – continued to rise in January. The purchasing power of the citizens is thus further eroded.
Better figures also for 2022
Compared to the autumn forecast, the figures for the past year are now better. “The annual growth rate for 2022 is now estimated at 3.5 percent in both the EU and the euro area,” says the EU Commission. In autumn, 3.3 and 3.2 percent were expected.
Foreign demand could also increase. Many expect China, for example, to recover economically after the country abandoned its zero-Covid strategy with lockdowns and other restrictions.
It is also emphasized that the forecast is subject to a high degree of uncertainty. For example, gas consumption could increase again if the recent fall in wholesale prices is passed on to consumers. The forecast was also made on the assumption that the Russian war of aggression against Ukraine would not escalate, but would continue, it said. (dpa)