2023-09-11 09:29:53
The European Commission is revising its economic forecasts downwards. She warns that continued high prices for goods and services are “taking a greater toll than expected.”
The economy of the European Union “continues to grow, although with reduced dynamics“, warns the European Commission in its forecasts published Monday morning.
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The European Union as a whole should experience modest growth of 0.8% this year and 1.4% in 2024.
The zone euro will also see rates revised downward: 0.8% in 2023 (compared to 1.1% in the previous estimate) and 1.3% in 2024.
Germany, the Union’s largest economy, will experience a decline of -0.4% this year, a worrying sign which should have repercussions on its neighbors. Poland, for example, will only grow 0.5% in 2023, following posting a high rate of 5.1% in 2022.
L’inflation in countries using the single currency should reach 5.6% in 2023 and 2.9% in 2024, a figure still far from the 2% annual target that the European Central Bank (ECB) is trying to achieve with an increase in its interest rates.
The bank will hold a new meeting on Thursday to decide on a possible tenth increase since July 2022.
The tightening of monetary conditions imposed by the ECB is one of the many reasons explaining the general loss of speed in the European economy.
The report points to falling consumption, slowing lending and sluggish industrial production, as well as the uncertainty caused by Russia’s war once morest Ukraine and the damage caused by natural disasters, including this summer’s floods and wildfires.
The European Commission highlights the extent to which high prices have permeated all sectors of the economy, well beyond energy, the driving force behind last year’s record inflation, but which has since fallen.
“Monetary tightening might weigh on economic activity more heavily than expected, but might also lead to a more rapid fall in inflation which would accelerate the recovery of real incomes.“, the report said.
“On the other hand, price pressures might prove more persistent, leading to a stronger monetary policy response“.
Among the good news, the EU labor market remains “exceptionally strong“, with a unemployment rate of 5.9% in June and an continued rise in wages.
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