The European Commission has announced that the EU is on a ‘healthier footing’ than expected in 2023, and may escape recession, experience growth and see prices fall.
The dire warnings of early autumn have been toned down with the release of the European Commission’s Winter 2023 Economic Forecast.
EU Commissioner for the Economy Paolo Gentiloni held a press conference on Monday that set out a fairly rosy picture, compared to the doom and gloom of last year.
His key messages included word that the EU’s economy was looking better than anticipated and is expected to avoid recession this year. This is mainly due to positive developments, including gas prices falling to below pre-war levels, a mercifully mild winter and better growth than previously thought.
The EU’s growth forecast is now set at 0.8%, a full 0.5 points above the autumnal projection, and the 2022 numbers have been revised up by 0.3% to 3.5%.
Additionally, inflation, according to Gentiloni, has peaked and is now set to decline. This is mainly credited to fast-declining energy prices. As a result, the inflation forecast is falling from a terrifying 9.2% in 2022 to a more modest 6.4% in 2023, and a manageable 2.8% expected for 2024.
Of particular interest is the stabilisation of wages versus inflation by 2024. This year will see a continuation of less purchasing power for employees due to higher costs, but nominal wage growth is anticipated to pick up by 2024 and, coupled with higher minimum wages in several member states, this will give the economy a boost with consumers opening their wallets more freely than is the current case.
Past risk factors, such as the pandemic and gas shortages, have diminished, but this is counter-balanced by the continuing uncertainty caused by the war in Ukraine as well as weaker demand for trade. Labour shortages and job vacancy rates are also to remain tight for the next two years, though with growth picking up, this should change.
In general, the future is looking significantly brighter in economic terms for the EU, with growth percentages in 2022 outstripping the world’s usual powerhouses of the USA and China.
Photo by Mathieu Stern for Unsplash