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Figures released by the European Commission on Monday show that the EU economy is expected to grow by 0.8% in 2023 and 1.4% in 2024, compared with 1% and 1.7% in May. has been done.
The committee also incrementally raised its inflation forecasts for next year as prices continue to rise, hurting consumer spending across the region.
Inflation is expected to fall to 6.5% in 2023 from 6.7% previously forecast, but to remain at 3.2% in 2024, 0.1 percentage point higher than previously forecast.
“Since the spring, the EU economy has lost momentum,” said Paolo Gentiloni, the European Commissioner for Economic Affairs. “Economic activity stalled in the second quarter and survey indicators point to a further slowdown in the coming months.”
The growth revision sets the stage for the European Central Bank to make a pivotal decision on Thursday on whether to raise interest rates to curb high inflation in Europe or keep rates unchanged to prevent an economic slump from worsening. It was held in the midst of
Europe’s economic outlook has deteriorated in recent months as weak manufacturing, weaker trade with China, less government support and pressure on consumer spending due to high inflation and rising borrowing costs.
“Consumer prices for most goods and services have remained high and are still on an upward trend, causing more damage than previously anticipated,” the commission said.
Expectations are high that the ECB will pause rate hikes on Thursday after a worsening outlook for the region’s economy underscored by a downward revision to the euro zone’s official second-quarter growth rate to 0.1% from 0.3%. It’s increasing.
But even though eurozone inflation has halved from a record high of 10.6% last October to 5.3% in August, high levels of inflation well above the ECB’s 2% target remain. Concerns remain.
Rising oil prices and a weaker euro, which drives up import costs, are creating upward pressure on inflation, meaning that the ECB is still considering further interest rate hikes.
The new figures predict that Germany’s real gross domestic product will contract by 0.4%, compared to previous expectations of a 0.2% rise. Germany’s economy is expected to continue growing by 1.1% in 2024, but the growth rate is lower than expected in the spring forecast.
Italy also received a downward revision of 0.3 percentage points in both 2023 and 2024, growing at 0.9% and 0.8% each year.
Little change in the outlook for global growth and trade means the EU cannot rely on demand from other countries to support its own economy, the Commission added.