On Monday 11 September, the European Commission revised downwards its growth forecasts for the euro area, to 0.8% of GDP in 2023 and 1.3% in 2024, and for the European Union, to 0.8% of GDP in 2023 and 1.4% in 2024, compared with the spring, due in particular to the recession - a fall in German GDP of 0.4% - that Germany is expected to experience this year.
The European Commissioner for Economy, Paolo Gentiloni, began by pointing out that the EU as a whole had avoided recession last winter despite the “magnitude of the shocks” it faced in macroeconomic terms, particularly energy, following the Russian military invasion. However, “the EU economy has lost momentum since spring”, stagnating in the second quarter, and economic indicators point to a further slowdown in the coming months, he noted.
Compared with its spring forecasts (see EUROPE 13182/1), the Commission has lowered its growth forecasts by 0.3% of GDP and 0.2% respectively for the euro area and the EU. For 2024, the downward revision to growth is 0.3% of GDP for both the euro area and the EU.
The economic forecasts presented on Monday only provide national data for the six largest EU economies: Germany, France, Italy, Spain, the Netherlands and Poland.
Germany. The economic slowdown is most pronounced in Germany. In the face of subdued exports and domestic consumption, the German economy is likely to experience a recession (-0.4% of GDP) this year, whereas in May the Commission was still forecasting growth - weak but positive (0.2%) - in the Union’s largest economy. Nevertheless, the EU institution predicts that the German economy will rebound in 2024, up to 1.1% of national GDP, boosted by a recovery in household consumption.
Paolo Gentiloni declined to agree with The Economist, which had questioned whether Germany was once again Europe’s ‘sick country’. We clearly recognise the weakness of the economic situation in Germany, but we all know the strength of German fundamentals and its ability to recover, he said.
For France, the summer economic forecasts have been revised upwards for this year, from 0.7% to 1.0% of GDP in 2023, but slightly downwards for 2024, from 1.4% to 1.2% of GDP. The strength of the French economy is mainly due to a rebound in exports, while domestic consumption, the country’s traditional economic lever, remains “sluggish”, noted the Commissioner.
Italy’s more pronounced economic slowdown came as a surprise, forcing the Commission to revise its growth forecasts for the country downwards, from 1.2% to 0.9% of GDP for 2023, and from 1.1% to 0.8% of GDP in 2024. The Commissioner refused to respond to criticism from Italy’s President, Giorgia Meloni, who accused him of not doing enough to promote Italian interests in Brussels. In his view, the data specific to Italy are not cause for concern, as they are part of the slowdown affecting all euro area countries.
In contrast, the Spanish economy continues to enjoy very good momentum, with an upward revision for 2023 from 1.9% to 2.2% of GDP, but a slight downward revision for 2024 from 2.0% to 1.9% of GDP.
Inflation is set to continue its downward trajectory, reaching 5.6% in 2023 and 2.9% in 2024 for the euro area, and 6.5% this year and 3.2% next year for the EU.
Mr Gentiloni spoke of the “risks and uncertainty” surrounding the European economy. The Russian military invasion, the impact of the ECB’s forced monetary tightening on the granting of credit to economic operators and the stagnation of private consumption, due in particular to wages rising less quickly than inflation, could have an even greater impact on growth in EU countries. Only employment is holding up better than expected, at a record level.
See the summer economic forecast: https://aeur.eu/f/8hp (Original version in French by Mathieu Bion)