By Le Figaro with AFP
The Commission says that “the European economy continues to show resilience in a difficult global context” but is watching inflation closely.
The European Commission on Monday raised its economic growth forecasts for 2023 in the euro zone, due to a start to the year “better than expectedamid calming energy prices and improving supply chains. The EU executive, however, warned of higher than expected inflation. It is now betting on growth in Gross Domestic Product (GDP) of 1.1% in 2023 (i.e. +0.2 points compared to the previous forecast of mid-February), then 1.6% in 2024 (+0 .1 point), in the 20 countries sharing the common currency. Same trend for the whole of the EU, whose growth is now announced at 1% (+0.2 point) in 2023, then 1.7% (+0.1 point).
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“The European economy continues to show resilience in a difficult global context“, observed the Commission in a press release. “More moderate energy prices, reduction of supply constraints“, after the logistical blockages inherited from the pandemic, as well as a “robust job market” have “sustained moderate economic growth in the first quarter, dispelling fears of recession“, he underlines. Eurozone GDP grew very slightly (+0.1%) in the first quarter of 2023 compared to the previous quarter, after having stagnated in the last three months of 2022. For the European Union as a whole, growth rebounded, with an increase of 0.3% after a decline of 0.1% in the fourth quarter of 2022. Result in particular of the efforts of Europeans to reduce their gas consumption and diversify their supplies following Russia’s invasion of Ukraine, the lull in energy prices “impacts the economy, reduces production costs and lowers household bills“, insists Brussels.
However, the headwinds persist, including still strong inflationary pressures. The Commission has thus revised its inflation forecast for 2023 upwards to 5.8% (+0.2 point) in the euro zone and 6.7% in the EU (+0.3 point), relying on its maintaining a high level after the peak reached last year, in particular strong underlying inflation (excluding energy and food), able to “restrict household purchasing power“. What to suggest a continuation of the monetary policy tightening, the European Central Bank (ECB) continuing to raise its rates to curb a rise in consumer prices well above its target level of 2%. “Although the ECB and other EU central banks are expected to approach the end of the interest rate hike cycle, the recent turmoil in the financial sector is likely to increase pressure on the cost and access to credit and slow investment growth“, in particular in the real estate sector, underlines the Commission.