/ world today news/ At the end of the year, the international institutions published disappointing forecasts: the “locomotives” of the EU fell into recession and are dragging the others there. Hopes were not justified. The recession will continue until at least mid-2024.
It didn’t float
In the first quarter of 2023, EU GDP fell by 0.1 percent, and in the fourth quarter of 2022, the same negative was observed. This is called a technical recession – negative dynamics for two quarters in a row.
The European Commission then noted: this is not much and will not last long. “The recession during the winter months was shallow. The situation on the labor market is positive, which confirms the economic stability of the euro area,” EC spokesman Verle Nuets said.
But she was too optimistic. In the second quarter – almost zero plus (0.2 percent on a quarterly basis and 0.5 on an annual basis), in the third – minus 0.1 compared to the previous one and plus 0.1 on an annual basis.
For comparison: Russia’s GDP in the third quarter added 5.5% on an annual basis, compared to the second – plus 7.8%. According to “Rosstat”, the increase in GDP is related to an increase in the index of the physical volume of added value in wholesale and retail trade (17.1%), construction (10.0%), industry (9.9%), hospitality and restaurants (7.1%), information and communications (6.7), agriculture (3.8), transport and storage (3.0).
A sad picture
The Eurozone was pushed into recession primarily by the “economic locomotives” – Germany and France. Both sides are at a standstill and there is no positive. In the second quarter, Germany had a minus 0.2 percent on an annual basis, in the third – 0.1. The French have plus 0.5 and minus 0.1 respectively.
Expensive energy resources, the decline in industrial production, high inflation, weak consumer activity and the unclear monetary policy of the European Central Bank (ECB) are the main negative factors.
In Germany, the index of business activity in manufacturing has not risen above 50 points since June 2022. It is now 43.1. In France – 42. Over 50 were only in January.
Companies reduce turnover both in the service sector and in industry, finds “Standard & Poor”
“The French economy is sinking into the quagmire of recession,” say economists at Hamburg’s commercial bank.
In Germany, the fact that at the end of November the Ministry of Finance pulled the emergency brake and froze the limit of budget obligations for the current year added fuel to the fire. At the time, authorities warned that the economy would face severe consequences because it would be necessary to stop funding critical measures to support energy prices and generally update the economy and infrastructure.
Standard & Poor’s says the resulting uncertainty over public finances will intensify the economic downturn.
Bad predictions
The European Commission expects a recovery in 2024. The recovery should be supported by increased consumption “against a stable labor market, stable wage growth and continued decline in inflation”.
However, according to analysts, this will not happen.
“Weaker global trade is hitting eurozone exports, while credit tightening is putting pressure on investment as bank lending to companies shrinks. The recovery will be shallow,” Fitch said in a December comment.
“The economy shrank in the third quarter by 0.1 percent; in the fourth quarter we forecast minus 0.3, in the first quarter of 2024 – minus 0.1,” Nomura Bank announced.
According to the Swiss financial group “Piquet”, in the first half of the year the Eurozone will continue to “balance between stagnation and recession”. Germany, according to economists, will remain the “weakest link”, while France will fare slightly better.
“Deutsche Bank” believes that by the end of 2024, the GDP of the EU can grow by only 0.2 percent. “Everything has been at a standstill since the third quarter of 2022 and it doesn’t look like that will change until mid-2024. That’s two years of almost zero growth,” said Mark Wall, chief European economist at Deutsche Bank.
We can only hope for a “modest improvement” in the second half of the year. However, given the geopolitical situation in the world, the risk of the decline turning into a deep recession is quite high.
Russia, according to UN estimates, will become one of the few G-20 countries whose economic development will accelerate. Analysts had forecast plus 2.2 percent this year and two percent next.
Translation: V. Sergeev
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