Goldman Sachs Expects Eurozone Will Avoid Recession This Year

Goldman Sachs revised its outlook for the eurozone this year, anticipating the Bloc to grow by 0.6%, compared with an earlier forecast for a contraction of 0.1%, after the economy showed more resilient at the end of 2022, natural gas prices plummeted, and China lifted Covid-19 regulations sooner than expected.

Given more resilient activity, sticky core inflation, and hawkish comments, Goldman Sachs economists no longer expect a eurozone recession, and they believe the European Central Bank (ECB) will tighten much more in the coming months.

The economists also anticipated that European inflation will drop faster than expected to around 3.25% by the end of 2023, citing lower commodity costs. However, rising labor costs continue to put upward pressure on service inflation.