EU economy growth expectations fall to 0.9% for 2024, pressure on inflation persists

Monday, 19 February 2024 15:47:06 (GMT+3)   |   Istanbul

The economic growth outlook for this year has been reduced and inflation has been set on a lower downward path than projected in the Autumn Forecast, according to the European Commission’s Winter 2024 Economic Forecast report. The prediction for 2023 is now only for 0.5 percent GDP growth both in the EU and the euro area, compared to 0.6 percent in the previous forecast, while predictions for 2024 have been lowered to 0.9 percent for the EU and 0.8 percent for the euro area, compared to 1.3 percent and 1.2 percent, respectively, both compared to the Autumn Forecast. In addition, in 2025, economic activity is expected to expand by 1.7 percent in the EU and 1.5 percent in the euro area.

Meanwhile, inflation in the EU and the euro area is expected to be at three percent and 2.7 percent in 2024, respectively, while inflation in 2025 is projected to be at 2.5 percent for the EU and 2.2 percent for the euro area.

There have also been positive developments since the 2023 Autumn Forecast. The sharp fall in energy prices was followed by a faster-than-expected moderation of price pressures. As energy supply keeps outstripping demand, spot and future prices for oil and especially gas are now significantly lower than assumed in the previous forecast. Retail energy prices are therefore set to fall further, helping the EU recover some of the competitiveness lost during the energy crisis. Despite mild upward pressure from higher shipping costs in the wake of Red Sea trade disruptions, underlying inflation continues on a steady downward path. As a result, economic activity may accelerate gradually this year. The pace of growth is set to stabilize as of the second half of this year.

On the other side, additional trade disruptions resulting from geopolitical tensions could add pressure on supply chains and prices, and hamper production. Ongoing tight monetary conditions could further delay the rebound in economic activity.

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