According to the European Commission, the EU will avoid a recession by reducing gas prices, supporting government policy, and increasing household spending, which boosts the region’s outlook.
Brussels raised its outlook for EU growth to 0.8% this year, which is stronger than the previous forecast of 0.3%, and stated that the region would not experience a technical recession. The commission forecasts that the euro area will grow by 0.9 per cent in 2023, which is better than 0.3%.
Brussels also stated that inflation has peaked and predicted that consumer price growth in the EU would be 6.4% this year, down from 9.2 per cent last year. From 8.4 per cent in 2022, inflation in the Euro area will fall to 5.6% this year. According to forecasts, inflation in the single currency region will fall further to 2.5% in 2024.
Last autumn, fears that the EU would be in a recession were fueled by fears of Russian gas supply disruptions and falling industrial output. The mild winter, however, has eased the pressure on businesses and households as the benchmark price for European gas fell to levels well below those of prewar.
The prospects have also improved abroad, including in China where the Covid-19 lockdown policies were relaxed. This has led to a positive reassessment and a reduction in supply chain interruptions.
“We entered 2023 with a stronger footing than we anticipated: the risks from recession and gas shortages have diminished and unemployment remains at an all-time low,” stated Paolo Gentiloni (EU economics commissioner).
