The EU says that the European economy has lost momentum this year against the background of a “high cost of living, weak external demand and monetary tightening.”
On Wednesday, the commission said that while economic activity is expected to gradually recover going forward, its “Autumn Forecast” revises EU GDP growth down compared to its summer projections.
Inflation is estimated to have dropped to a two-year low in the euro area in October and is set to continue declining over the forecast horizon.
Following what it calls a robust expansion throughout most of 2022, real GDP contracted towards year-end and barely grew in the first three quarters of 2023.
Still high, though declining, inflation, and tightening monetary policy took a heavier toll than previously expected, alongside weak external demand.
The latest business indicators and survey data for October, published on 15 November, point to subdued economic activity also in the fourth quarter of this year, amid increased uncertainty.
Overall, the Autumn Forecast projects GDP growth in 2023 at 0.6% in both the EU and the euro area, 0.2 percentage points below the Commission’s summer forecast.
Economic activity is expected to gradually pick up as consumption recovers on the back of a steadily robust labour market, sustained wage growth and continued easing of inflation.
The EC spokesman said, “Despite tighter monetary policy, investment is projected to continue increasing, supported by overall solid corporate balance sheets and by the Recovery and Resilience Facility. In 2024, EU GDP growth is forecast to improve to 1.3%. This is still a downward revision of 0.1 pps. from the summer. In the euro area, GDP growth is projected to be slightly lower, at 1.2%.”