The European Commission on Friday cut the GDP growth forecast for 2023 and expects eurozone inflation to 6.1% next year, with Russia’s invasion of Ukraine lowering global demand and reinforcing inflationary pressures.
The commission lowered its prediction for 2023 GDP growth in the 19-country eurozone from 1.4% to 0.3% in its quarterly report. In 2024, the EU expects economic growth in the eurozone to reach 1.5%.
The eurozone’s real GDP growth surprised on the upside in the first half of 2022, as consumers resumed spending, particularly on services, following the lifting of Covid-19 restrictions, according to the commission, boosting its prediction for GDP growth in 2022 to 3.2% from 2.6% in July.
However, the economy in the region began a more difficult phase in the second half of the year. Therefore, the offices believe that the eurozone will enter recession in the fourth quarter due to growing uncertainty driven by the conflict between Russia and Ukraine, rising energy costs, weaker purchasing power, and tighter financing policies.
The economy is likely to decline further in the first quarter of 2023 before returning growth in the spring, the commission said in the note.