The European economy will be stronger than previously feared this year after a mild winter and low unemployment averted the worst of the energy crisis and recession, the European Commission (EC) said.
Economic growth in the euro area – the 20 countries that use the euro – is expected to be 0.9% this year, compared to a forecast of 0.3% before Christmas.
Growth in the rest of the EU is expected to increase by 0.8 percent.
Ireland is projected to be the fastest growing EU member this year, with GDP growth projected at 4.9 percent, beating a forecast of 3.2 percent three months ago.
Falling wholesale gas prices, together with high levels of gas storage, improved growth prospects, EK added. He also urged Europeans to use less electricity by taking cold showers, among other things. The continent also had one of the warmest winters on record, resulting in lower energy demand.
Employment also made a significant contribution, with the unemployment rate remaining at a record low of 6.1 percent until the end of 2022.
Inflation is expected to fall from the current 9.2 percent to 6.4 percent this year and then to 2.8 percent in 2024.
Paolo Gentiloni, Commissioner for Economic Affairs, said Europe entered 2023 “on a stronger footing than expected: the risks of recession and gas shortages have disappeared and unemployment remains at an all-time low.”
However, Mr. Gentiloni warned that the outlook could soon change if Russia escalates violence in Ukraine and raises gas prices.
He added that China’s easing of pandemic restrictions could also increase energy demand and the price Europe must pay for alternative supplies.
The figures contrast with the state of the UK economy, where Goldman Sachs forecasts a 1.2% contraction in real GDP in 2023.
Jonathan Haskell, Bank of England rate-setter, told The Overshoot this week that business investment has “virtually leveled off” since the 2016 Brexit vote, wiping out about £29bn, about 1.3 percent of GDP.
Bank of England Governor Andrew Bailey said last month that the pandemic and cost-of-living crisis mean a recession is still looming.
He said the most likely outcome for the UK economy would be a long, flat recession with a feature of “weak activity for quite a long period of time”.
Source: I News
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