Weak economic activity leads Brussels to lower eurozone GDP forecast

The “very weak” economic activity of recent months in the eurozone and the European Union, which is expected to continue, prompted the European Commission this Monday to revise downward its forecasts for economic growth in 2024 to 1.3% and 1.4%. %.

In the summer economic forecasts published this Monday, the community’s chief executive forecasts gross domestic product (GDP) growth of 0.8% this year in the single currency area and the European Union (EU) as a whole, as well as 1.3% and 1.4%. , respectively, next year.

These percentages compare with forecasts of 1.1% for the eurozone and 1% for the EU in 2023 and 1.6% and 1.7% respectively in 2024, in line with what was predicted in the spring forecasts published in May last year.

“The EU economy continues to demonstrate resilience in the face of the enormous shocks it has experienced in recent years, but has lost its dynamism. Economic activity in the EU was very weak in the first half of 2023,” the institute contextualizes in the published information. this Monday.

At stake is a scenario of timid economic growth and weak consumption amid a slower decline in inflation and tight monetary policy.

Brussels notes that these forecasts are still “surrounded by enormous uncertainty” due to “global geopolitical and economic challenges”, especially related to the war in Ukraine caused by the Russian invasion.

“The current summer interim forecast is surrounded by enormous uncertainty and upside and downside risks. Russia’s ongoing war of aggression against Ukraine, broader global geopolitical and economic challenges, and the ongoing synchronized contraction of the international money supply are likely to push or lower the growth and inflation trajectories of the European economy beyond what is currently projected.” says the community’s executive director.

The European Commission today published economic forecasts for the entire eurozone, the EU and the six largest EU economies (not including Portugal) for a period of subdued GDP growth and slowing inflation.

The forecasts come at a time of “modest” GDP growth after statistics office Eurostat announced last week that eurozone economic growth slowed to 0.5% in the second quarter of this year and the eurozone economy slowed to 0.5%. EU by 0.4% compared to 1.1% in both cases compared to the same period last year.

Also at this time, inflation rates in the 20 countries of the single currency are stabilizing.

The eurozone’s annual inflation rate remained stable in August from July at 5.3%, but below the previous year’s 9.1%, according to Eurostat.

Inflation has been falling in recent months after reaching historic levels due to the economic reopening from the Covid-19 pandemic, the energy crisis and the economic fallout from the war in Ukraine, but is still above the 2% target. .European Central Bank (ECB) to ensure price stability.

To achieve this, the ECB has tightened monetary policy, consistently raising interest rates, but now at a slower pace.