EU struck by ‘technical’ winter recession amid 2023 growth forecast

Brussels, Nov 11 (EFE).- The eurozone is heading towards a recession in the last quarter of 2022 with inflation set to continue to climb in 2023, the bloc’s macroeconomic forecast reported on Friday.

“The EU and euro area, and most Member States, are (…) expected to experience a technical recession this winter,” the European Commission Autumn 2022 forecast warned.

The EC added that despite the looming recession, projections of a 0.3% growth rate for 2023 were expected, more than one point below what summer forecasts for next year predicted.

Brussels also revised inflation projections for 2023 up by more than two points, placing it at 6.1%.

“A very large revision with respect to the 4.6% and 4.0% expected respectively for the EU and the euro area only a few months ago,” the report said.

In 2022, GDP growth in the single currency area will be 3.2% even though the economy will have contracted by 0.5% in the fourth quarter. Inflation will reach a high of 8.5%, nine-tenths higher than the last projection.

For the European Union as a whole, a similar trend is expected with a growth forecast for 2022 of 3.3%, and down to 0.3% by 2023, while inflation will hit a high of 9.3% and drop to 7% by 2023.

“The sharp rise in inflation under the pressure of energy, food and other commodity prices is hitting a global economy that is still struggling with the economic consequences of the pandemic crisis,” the financial report said.

“The EU is among the most exposed economies, due to its geographical proximity to the war and heavy – albeit much diminishing – reliance on imports of fossil fuels,” it added.

The Brussels report was optimistic that a rebound in spring as inflation moderates in the second quarter was on the cards but that headwinds holding back demand and growth would persist.

The fresh forecast “rests on the assumption that elevated energy retail prices and other policy incentives will result in a continued reduction of demand, while the diversification of supply achieved this year will carry on over the forecast horizon.

“Under such hypotheses, which are consistent with the gradual decline in future prices in 2023 and 2024, the EU is assumed to avoid crippling gas shortages also next winter,” the EC report added. EFE

lpc/ch/jt