The EU Commission is more optimistic about the economic prospects for the euro zone than it was in the winter. However, the experts anticipate persistently high inflation. And the prospects for the German economy remain poor.
According to a forecast by the EU Commission, the economy in the EU will develop better than expected this year. The authority expects growth of 1.0 percent for the EU, according to the estimate published today. In the winter forecast published in February, the Commission had still assumed growth of 0.8 percent.
The authority is now assuming growth of 1.1 percent for the countries in the euro zone. In winter, the forecast was still 0.9 percent. The European economy is in better shape than assumed in the autumn, said EU Economic Commissioner Paolo Gentiloni. Lower energy prices, easing supply shortages and a strong labor market led to moderate growth in the first three months of the year and allayed fears of a recession.
From Brussels’ point of view, however, nothing has changed in the meager prospects for the German economy: As forecast in winter, it should only grow by 0.2 percent. The federal government expects growth of 0.4 percent to be twice as strong in Germany. Only Estonia is worse off than Germany with minus 0.4 percent in gross domestic product (GDP), Finland is also only expected to achieve meager growth of 0.2 percent.
Inflation persists
For the coming year, the Commission is finally assuming growth of 1.7 percent, after 1.6 percent in the winter forecast. For the euro area, she expects 1.6 percent in 2024. Before it was 1.5 percent.
“Inflation has proved more stubborn than expected,” Gentiloni stressed. The Commission expects an inflation rate (HICP) of 6.8 percent for Germany in 2023 for a European comparison, in February it had predicted 6.3 percent. For the euro zone, it now estimates inflation of 5.8 percent after 5.6 percent in the winter forecast.
The inflation rates in Germany are likely to remain high at 2.7 percent and in the euro zone at 2.8 percent next year. The European Central Bank is aiming for a medium-term rate of 2.0 percent for the euro area, which is considered ideal for the economy. ECB chief economist Philip Lane expects inflation in the euro area to ease significantly over the course of the year. For the ECB, the fight against the ongoing price surge is not yet won. In April, the inflation rate rose slightly to 7.0 percent, after falling to 6.9 percent in March from 8.5 percent in February.
industrial production surprisingly weak
Meanwhile, industrial production for the euro zone saw a significant setback in March. In a month-on-month comparison, total production fell by 4.1 percent, according to the statistics office Eurostat. On average, analysts had only expected a decline of 2.8 percent.
Production still increased in the first two months of the year. In February it had increased by 1.5 percent, in January by 0.6 percent. Compared to the same month last year, production in March also fell, by 1.4 percent. Analysts had expected an average increase of 0.1 percent in this regard.