Analysts no longer see the prerequisites for a recession in the eurozone
There are no prerequisites for a recession in the eurozone.
Economists at one of the largest investment banks Goldman Sachs improved their forecast after the European economy showed resilience in late 2022, natural gas prices fell sharply, and China abandoned the restrictions imposed in connection with COVID-19 ahead of schedule, reports Bloomberg.
Eurozone GDP is projected to grow by 0.6% this year; the previous forecast was for a contraction of 0.1%. Inflation is also expected to fall faster than anticipated to around 3.25% by the end of 2023. It has already dropped below 10% in December. According to preliminary estimates, annual inflation in December amounted to 9.2%, according to Eurostat. This is the lowest figure in the last four months. The decline began in November, but then did not reach single digits, stopping at 10.1% compared to 10.6% in October.
Price growth slowed down especially noticeably in Germany, from 11.3% to 9.6%. The lowest rates were recorded in Spain (5.6%), Luxembourg (6.2%) and France (6.7%), the highest in Latvia (20.7%), Lithuania (20%) and Estonia (17 ,five%).
Despite this, the eurozone indicator is still several times higher than the target level set by the ECB at around 2%. However, as Politico points out, a return to numbers under 10% could mean that the peak of the cost-of-living crisis in Europe is drawing to a close. The publication adds that this could play a role in limiting the cost of energy and the strengthening of the euro.
As the specialized portal MarketWatch writes, the economies of Germany and Italy will be on the verge of recession, as they used to be heavily dependent on Russian gas imports, while France and Spain have diversified energy sources.
Analysts at Goldman Sachs also believe that the European Central Bank will continue to raise the deposit rate, which may reach 3.25% by May against the current 2%. Thus, experts confidently declare that there are no prerequisites for a recession in the eurozone.
