2023-06-08 12:22:00
The euro zone entered a technical recession at the start of the year, with GDP falling for two consecutive quarters by 0.1% between January and March, after a similar drop in October-December, according to revised figures published by Eurostat on Thursday , reports AFP.
ECB headquartersPhoto: Martti Kainulainen / Shutterstock Editorial / Profimedia
The European Statistics Institute had previously expected stagnation (0%) in the last quarter of 2022 compared to the previous quarter, and growth of 0.1% in the first quarter of 2023.
The downward revision (an unexpected one) is largely explained by what happened in Germany, as the EU’s “economic engine” has gone into recession.
The latest figures cast a shadow over the eurozone’s outlook for the full year. In mid-May, the European Commission forecast growth of 1.1% in 2023 in the 20 countries that share the single currency.
That figure now looks “optimistic,” Charlotte de Montpellier, an economist at ING Bank, told AFP. She expects just 0.5% for the full year.
“Since the spring, all the data has been bad,” she pointed out, recalling in particular the situation of German factories and new industrial orders. In her opinion, “the European economy is in a stagnant phase and has barely made it through the winter because of the energy shock”.
Even though gas and oil prices have fallen in recent months, last year’s price hike has had a major impact on household confidence, reducing consumption.
Inflation remained high at 6.1% in May despite a decline, and price rises are now affecting food, manufacturing and services.
Also, the European economy is affected by the increase in interest rates by the European Central Bank, which means a reduction in credit demand and a brake on investment, especially in real estate, which leads to a decrease in construction activity.
The economic slowdown in the United States and China’s weaker-than-expected recovery are also weighing on European exports.
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