Image: VOLKER Weihbold
In the winter forecast, the value was still 0.5 percent. Things should go uphill in 2024: Domestic growth should then reach 1.6 percent. Inflation remains high at 7.1 percent this year and is not expected to fall to 3.8 percent until 2024.
The EU Commission continues to cite high energy prices, rising unit labor costs and weak export growth as reasons for the weaker domestic growth expectations. Significant wage increases in 2023 led to high inflation. However, Brussels expects high retail energy prices to ease gradually over the forecast period. The higher nominal wages should also lead to more consumption and thus stronger growth in 2024. In addition, an increase in exports is expected.
Things are looking better for the EU as a whole: Here the growth prospects for the current year have been corrected to 1.0 percent (0.8 percent in the winter interim forecast). In 2024, EU-wide economic growth is expected to reach 1.7 percent. In the euro area, gross domestic product (GDP) is expected to increase by 1.1 or 1.6 percent. “The EU has averted a recession,” stressed EU Economic Commissioner Paolo Gentiloni in Brussels. According to the EU Commission, lower energy prices, easing supply bottlenecks and a strong labor market in the first quarter of 2023 have led to better prospects. Significantly lower energy prices had an impact on the economy and lowered companies’ production costs.
According to forecasts, unemployment across the EU will continue to fall to 6.2 percent in 2023 and 6.1 percent in 2024. Low values are also forecast for the euro zone at 6.8 and 6.7 respectively. After 4.8 percent in 2022, a slight increase is expected for Austria with 4.9 and 5.0 percent this year and 2024 respectively. The reason, according to Brussels, is that the domestic labor supply is growing faster than employment.
Inflation remains higher than recently expected: The EU Commission expects 5.8 percent in the euro zone and 6.7 percent in the EU for 2023. An relaxation of 2.8 or 3.1 percent is not expected until 2024. “We have passed the peak of inflation,” stressed Gentiloni. Due to the uncertain global situation, however, the forecast is subject to great uncertainty. Persistently high core inflation could continue to curb household purchasing power. In addition, further turmoil in the banking sector or related to broader geopolitical tensions could pose new challenges for the global economy. Difficult financing conditions or further uncertainties regarding Russia could turn off growth again.
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