Europe’s economy will grow less than originally predicted, according to the European Commission’s latest forecast.
The EU institution on Wednesday revised its 2023 GDP growth expectations down to 0.6% in both the 27-member bloc and the eurozone, 0.2 points lower than its previous summer projections.
Brussels puts this down to the stubbornly high cost of living, weak external demand and monetary tightening by the European Central Bank, which operated multiple interest rate hikes this year.
But Economy Commissioner Paolo Gentiloni said that he is optimistic about the future, especially for households.
“Over the next two years, private consumption is set to be the key growth driver, as wage increases should outpace inflation, lifting households purchasing power,” Gentiloni told reporters in Brussels.
“A robust labour market is also set to contribute. The recovery in private consumption could be even stronger in the absence of the high savings rates expected to persist over the forecast horizon.”
Tuesday’s forecast also contained some good news on the inflation front.
Consumer prices continued their downward trend, declining to 2.9% in the euro area in October, the lowest level in more than two years.
Just one year ago, inflation had peaked at 10.6%.
While the decrease in the past year was mainly driven by the sharp fall in energy prices, it has now become broad-based across all main consumption categories.
However, Maria Demertzis, a senior fellow at Brussels-based economic think tank Bruegel, said that there are still economic headwinds to look out for in 2024.
“Those countries that are much more energy-dependent or had been energy-dependent on Russia and actually have an economy that is very energy-intensive, are the ones that are bearing the greatest costs,” Demertzis told Euronews.
“And here, really, I’m thinking about Germany. Germany really is the engine of the European Union and if Germany is not growing, then the rest of Europe will also feel the impact of that.”
For the first time, the Commission’s autumn economic forecast covered Bosnia and Herzegovina, Moldova and Ukraine, to which the EU granted candidate status last year.
All three posted promising numbers, with the Ukrainian economy showing remarkable resilience in 2023.