Growth was held back last year by the erosion of household purchasing power, strong monetary tightening, the partial withdrawal of fiscal support and falling external demand.

The European Commission’s Winter Interim Forecast recently revised growth projection for this year to 0.9 per cent in the EU and 0.8 per cent in the euro area from 1.3 per cent and 1.2 per cent respectively in the Autumn Forecast.
Economic activity is expected to expand by 1.7 per cent in the EU and by 1.5 per cent in the euro area in 2025.

After narrowly avoiding a technical recession in the second half of last year, prospects for the EU economy in the first quarter of 2024 remain weak.

In 2025, economic activity is still expected to expand by 1.7 per cent in the EU and by 1.5 per cent in the euro area.

The pace of growth is set to stabilise as of the second half of 2024 until end-2025.

The latest forecast said growth in both the EU and the euro area was down to 0.5 per cent last year from 0.6 per cent projected in the Autumn Forecast.

Following subdued growth last year, the EU economy entered this year on a weaker footing than expected, a press release from the Commission noted.

Inflation is set to slow down faster than projected in the autumn.

In the EU, harmonised index of consumer prices (HICP) inflation is projected to fall from 6.3 per cent in 2023 to 3 per cent this year and 2.5 per cent in 2025. In the euro area, it is expected to decelerate from 5.4 per cent in 2023 to 2.7 per cent in 2024 and to 2.2 per cent in 2025.

However, economic activity is still expected to accelerate gradually this year. As inflation continues to abate, real wage growth and a resilient labour market should support a rebound in consumption.

Despite falling profit margins, investment is set to benefit from a gradual easing of credit conditions and the continued implementation of the Recovery and Resilience Facility. In addition, trade with foreign partners is expected to normalise, after a weak performance last year, the Commission said.

Fibre2Fashion News Desk (DS)