“The eurozone economy is finally showing meaningful growth again,” said Bart Collin, senior economist at ING, citing lower energy prices and a return to consumer purchasing power as drivers of growth.
Importantly, Germany, the region's largest economy, marked a return to growth with GDP expanding by 0.2% after contracting in both the previous two quarters. France saw a similar increase, while Spain and Portugal both recorded an impressive 0.7% increase. The Italian economy has also recovered, with a growth rate of 0.3% in the fourth quarter of 2023 compared to her 0.1%.
Monthly figures suggest that services are the main driver of the recovery, but there are also recent signs that industrial production, hit by high energy prices in 2022, has also bottomed out. . Business confidence in Germany, as measured by the Ifo Institute, has been rising throughout the year. Although not yet a strong turnaround, the Czech Republic and Hungary, two countries whose manufacturing industries are deeply integrated with Germany, on Tuesday reported stronger-than-expected growth for the quarter.
Southern Europe shines
The Southern European economy continued to perform well, supported by solid performance in the service industry. Analysts point to tourism in particular as a growth driver.
Miguel Cardoso, chief economist for Spain at BBVA Research, told POLITICO that this reflects a range of issues as consumers around the world still prefer to spend money on services and experiences rather than goods. he said. Southern Europe has become more competitive thanks to weak currencies and relatively low wage growth, while at the same time increasing investment in modern hotels. Meanwhile, geopolitical uncertainty is driving Europeans closer to home, he argued.
The improvements come amid intense debate in Brussels and European capitals over how to revive the EU's competitiveness and respond to new subsidy competition led by China and the United States. , recently warned that the bloc “cannot wait any longer” to tackle the deep-rooted problems holding back the economy.
