EU tipped to avoid recession after gas crisis eases
The EU is predicted to narrowly avoid recession as a result of a milder-than-expected energy shock, although households face difficult times ahead as cost of living pressures ease only gradually, the European Commission has said.
Economic growth for the 27 countries of the EU is forecast to be 0.8% in 2023, compared with a 0.3% projection last autumn, when fears of winter power outages and the rising cost of living ran high. In the 20-country eurozone, the economy will expand by 0.9% in 2023, boosted by a better-than-expected performance in Germany and Italy, as well as relatively stronger growth in Spain.
The rapidly declining price of gas means inflation has now peaked, with the headline rate forecast to fall from 9.2% in 2022 to 6.4% in 2023, then 2.8% in 2024.
“The EU economy entered 2023 on a healthier footing than expected and looks set to escape recession,” the EU economy commissioner, Paolo Gentiloni, told reporters. He warned, however, that inflation in 2023 would remain stubbornly high, putting pressure on households. “Europeans still face a difficult period ahead, with growth still expected to slow and inflation set to relinquish its grip on purchasing power only gradually.”
The commission estimates that in 2022 the EU experienced economic growth of 3.5%, a better rate than either China or the US. The UK, by contrast, expanded by 4.1% in 2022 but is forecast by the International Monetary Fund to be the only economy to shrink in 2023 among major industrialised countries.
Despite a better-than-expected start to the year for the EU, growth will slow compared with 2022, as wages lag behind prices, meaning consumers are likely to be cautious about spending money.
The EU is now expected to avoid recession, as a result of
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