Brussels gives the all-clear: Europe will probably avoid recession

In its autumn forecast, the EU Commission paints a bleak picture.

Brussels gives the all-clear: Europe will probably avoid recession

In its autumn forecast, the EU Commission paints a bleak picture. This is now clearing up a bit. The economy in the euro zone did not shrink in the fourth quarter of 2022, they say. And in 2023 the situation will also improve. Inflation shouldn't be quite as high either.

Both the euro zone and the entire EU are expected to avoid the initially feared recession this winter. The economy in the euro zone did not shrink in the fourth quarter of 2022 and slightly higher growth of 0.9 percent is now expected for 2023, the EU Commission said. At the same time, inflation in the euro zone, at 5.6 percent, is likely to be somewhat lower than initially thought.

In its autumn forecast in November, the Brussels authorities still painted a very bleak picture, especially for Germany. For the entire EU, she had forecast growth of just 0.3 percent for 2023, and even a decline of 0.6 percent for Germany. "Favorable developments since the autumn forecast have improved growth prospects for this year," the commission said.

For the EU, growth of 0.8 percent is expected, Germany is back in positive territory at 0.2 percent - the federal government is also assuming this value. Only in Sweden can a decline in economic output be expected (-0.8 percent), the commission explained. Among other things, she refers to the "diversification of supply sources" for natural gas and the "drastically reduced consumption". As a result, gas storage facilities are full and the wholesale price has fallen to the level before the Russian attack on Ukraine.

For this reason in particular, Brussels is also assuming lower inflation in the euro zone. In November, the forecast for 2023 was still 6.1 percent. However, core inflation - ie excluding food and energy - has probably not yet peaked. Nevertheless, business confidence is increasing again. For the entire EU, the Commission expects inflation of 6.4 percent this year.