The European Commission is still forecasting moderate growth in 2024 for the euro area (0.8% of GDP) and the European Union (1.0% of GDP). And, building on a stronger-than-expected rebound in the first quarter of this year (0.3% in both the euro area and the EU - see EUROPE 13402/22), it confirms that an economic rebound is expected in 2025 in both the euro area (1.4%) and the EU (1.6%).
“After a difficult 2023”, during which the economy almost stagnated (0.4% of GDP in the euro area and the EU), “we think we have turned a corner”, declared the European Commissioner for Economic Affairs, Paolo Gentiloni, on Wednesday 15 May when presenting the Commission’s spring economic forecasts. In his view, the rebound in the economy will be driven primarily by “private consumption” (0.4% in 2023, 1.3% in 2024 and 1.7% in 2025), thanks in particular to continued job creation (+2.5 million jobs expected by the end of 2025), while investment will remain weak overall in 2024 despite strong public investment.
In 2024, only Estonia is likely to face a recession (-0.5% of GDP). All Member States will return to growth, although Finland (0.0%), Germany (0.1%), Sweden (0.2%) and Austria (0.3%) will be close to stagnation. Growth will remain weak in France (0.7%) and Italy (0.9%), while it will be most robust in Malta (4.6%), Croatia and Romania (3.3%) and Cyprus (2.8%). In Spain, wealth creation will remain strong (2.1%).
Inflation. The EU institution expects price rises to decelerate sharply, from 6.4% in 2023 to 2.7% in 2024, then 2.2% in 2025 among the EU27 Member States. For the euro area, the trajectory appears relatively similar: 5.4% in 2023, 2.5% in 2024 and 2.1% in 2025.
The consolidation of public finances will continue in 2024 with the withdrawal of the emergency measures adopted in 2022 to deal with the energy crisis caused by Russia’s invasion of Ukraine, before stagnating somewhat in 2025. The average public deficit is expected to be reduced from 3.6% in 2023 to 3.0% in 2024, then 2.8% at euro area level, and from 3.5% to 3.0%, then 2.9% at EU level over the same period.
Here again, there are significant differences between Member States. Cyprus (2.9%), Ireland (1.3%) and Portugal (0.4%) will record a budget surplus. By contrast, the highest public deficits are expected in Romania (-6.9%), Slovakia (-5.9%), Hungary and Poland (-5.4%) and France (-5.3%).
Asked about the differences between the national trajectories modelled by the Commission and those envisaged by France and Italy (-4.7%), Mr Gentiloni pointed out that the EU institution’s forecasts are made on a ‘no-policy-change basis’ from the moment they are issued. They therefore do not take into account measures that have been announced but not implemented, such as savings of €20 billion in France (see EUROPE 13401/23).
EDP. The Commissioner also noted that in 2023, 11 Member States posted a public deficit in excess of 3% of national GDP: Spain (-3.6%), Estonia (-3.4%), the Czech Republic (-3.7%), Belgium (-4.4%), Malta and Slovakia (-4.9%), Poland (-5.1%), France (-5.5%), Romania (-6.6%), Hungary (-6.7%) and Italy (-7.4%) (see EUROPE 13396/14). There will be the same number of these countries in 2024 and nine in 2025, he said.
The figures for 2023 mean that the 11 countries could be subject to an excessive deficit procedure (EDP) in mid-June. But Mr Gentiloni did not rule out the possibility that the Commission’s individually tailored budgetary and economic policy recommendations for exiting this procedure would only be shared in the autumn, when the Member States are supposed to present their multiannual macro-budgetary programmes by the end of September in order to prepare for the implementation of the revised Stability Pact at the beginning of 2025.
“When you start a new process, you need flexibility, patience and determination. (...) The budgetary summer will be a hot one”, stressed the Commissioner. He refused to predict which countries would be subject to an EDP, as the Commission would also be analysing the “relevant factors” that would allow certain countries, such as Spain, to avoid an infringement procedure. He also stressed the importance of finding the right balance to keep public finances under control without hampering economic recovery.
Public debt. Finally, the Commission has forecast that public debt will stagnate in 2024 compared to 2023, before rising slightly in 2025. In the euro area, public debt is expected to remain at 90.0% of GDP this year, before rising to 90.4% next year. At EU level, it will stabilise at 82.9% of GDP in 2024, before rising to 83.4% in 2025.
Once again, there are major differences between Member States. In 2024, public debt as a proportion of national GDP will be highest in Greece (153.9%), Italy (138.6%), France (112.4%), Spain (105.5%) and Belgium (105.0%). Among these highly indebted countries, Italy, France and, to a lesser extent, Belgium are still on an upward trajectory over the period 2023-2025. By contrast, public debt is lowest in Estonia (21.4%), Bulgaria (24.8%), Denmark (26.5%) and Luxembourg (27.1%). Despite a sluggish economy, Germany will continue to reduce its debt, from 63.6% in 2023 to 62.9% in 2024.
See the Commission’s spring economic forecasts: https://aeur.eu/f/c7u (Original version in French by Mathieu Bion)