Eurozone economic growth will expectedly hit 0.9% in 2023, 0.6 percentage points stronger than previously forecast in November, while inflation is expected to lower as moderating rates in the fourth quarter of 2022 suggest that it had already peaked, the European Commission said Monday.
The European Commission forecasts 0.8% economic growth in the European Union (EU) and 0.9% in the Eurozone for 2023, respectively 0.5 and 0.6 percentage points higher than its previous forecast in autumn. For 2024, the growth rate remains unchanged at 1.6% and 1.5% for the EU and the Eurozone, respectively.
The Commission explained that the improved outlook reflected favorable developments since the previous forecast. Gas storage levels are now higher than the seasonal average of previous years due to the continued diversification of supply sources and a substantial decline in demand, and wholesale gas prices are now far lower than they were before World War II.
Additionally, the EU job market has maintained its strong performance, with the unemployment rate expected to stay at its all-time low of 6.1% until the end of 2022. Surveys from January indicate that the economy is likely to avoid a contraction in the first quarter of 2023 as confidence is rising.
Given that growth in the last three months of 2022 was 0.1% quarter-on-quarter and that the Commission expects a 0.0% rate in the first three months of 2023, the area will narrowly avoid the technical recession it had predicted in November.
"Despite exceptional adverse shocks, the EU economy avoided the fourth-quarter contraction projected in the Autumn Forecast. The annual growth rate for 2022 is now estimated at 3.5% in both the EU and the euro area," the Commission said in a statement.
