“European Commission Forecasts Higher Economic Growth and Inflation for Eurozone in 2023”

The European Commission on Monday boosted its forecast for 2023 economic growth in the euro zone while raising its forecast for inflation in the single currency area.

The Commission’s expectations for the spring are more optimistic than those issued late last year, although the decline in inflation from record levels is much slower than expected.

The Commission raised its growth forecast for the year 2023 by 0.2 points to 1.1% in the single currency area, and raised expectations for growth in the European Union, which includes 27 countries, for the year 2023, although it remained less than that recorded in the euro area at about 1%.

Brussels also raised growth forecasts for 2024 in the single currency area, which includes 20 countries, by 0.1 point, to 1.6%.

“The European economy is in a better position than we expected last fall,” European Commissioner for Economics Paolo Gentiloni said in a statement. .

Inflation expectations in the euro area were also revised and raised to 5.8% for the year 2023, compared to 5.6% in previous forecasts.

One last disturbance

In contrast, consumer prices are expected to decline to 2.8% in 2024, which is still higher than the 2% target set by the European Central Bank.

“While inflation remains high, financing conditions are expected to tighten further,” the statement warned.

The European Commission also referred to the recent turmoil in the banking sector after the bankruptcy of 3 US banks and the acquisition of Credit Suisse by the Swiss bank “UPS” after concerns about its financial situation.

“Although the European Central Bank and other central banks in the European Union are expected to be nearing the end of their rate-raising cycle, the recent turmoil in the financial sector is likely to exacerbate pressure on the cost and ease of access to credit, slowing investment growth and affecting in particular to invest in housing.

The better-than-expected results in Europe were explained by the rapid decline in energy prices from their peak after Russia, the largest gas exporter, launched a war against Ukraine, a candidate for membership in the European Union.

Gentiloni said that wholesale gas prices in the European Union last week reached their lowest since the summer of 2021, long before the war, which led to sanctions and energy embargoes.

Electricity prices fell in parallel, and oil prices are expected to decline this year after a mild winter and the efforts of energy producers in the European Union to diversify suppliers.

Gentiloni also noted that the EU labor market is the strongest in decades, with the unemployment rate in the eurozone hitting an all-time low in March at 6.5%.

For the first time, the European Commission’s projections include estimates for Ukraine, Moldova and Bosnia and Herzegovina, all of which are candidates for EU membership.

After the collapse of the gross domestic product by 29% last year due to the war, the Ukrainian economy is expected to stabilize this year, with a growth of 0.6%, and it may recover in 2024, depending on the outcome of the conflict.