EU Cuts Growth Forecast: +0.8%

The EU economy is slowing down, with updated European Commission summer forecasts projecting +0.8% in 2023 against the previous +1%. GDP growth estimates for 2024 have also been revised downward: +1.4% from +1.7%. The eurozone growth is also revised downward: +0.8% in 2023 (from +1.1%) and +1.3% in 2024 (from +1.6%).

According to the EU executive, economic activity slowed in the first half of 2023 due to the strong shocks the Union has experienced from weak domestic demand and high consumer prices.

In any case, inflation is expected to ease slightly in the coming months, with the harmonized index of consumer prices now set to reach 6.5% in 2023 (predicted at 6.7%) and 3.2% in 2024, while eurozone inflation is estimated at 5.6% in 2023 and 2.9% in 2024.

“The EU avoided a recession last winter – no small feat given the scale of the disruption we faced,” explained EU Commissioner for the Economy Paolo Gentiloni. “This resilience, evident primarily in the labor market, demonstrates the effectiveness of our overall political response. However, the numerous obstacles our economy has faced this year have resulted in weaker growth than projected in the spring. Inflation rates are falling, but at different rates across the EU.”

The war in Ukraine and the weakness of the Chinese economy are particularly worrying: it is unlikely that we will be able to rely too much on external demand to re-energize the economy. Encouraging factors include falling energy prices and a strong labor market with unemployment at historic lows, as well as continued employment expansion that is also linked to rising wages.