The European Commission predicted the euro area economy It aims for moderate growth despite geopolitical risks, and expects inflation to be on track to reach its target.
In its latest spring economic forecast published on Wednesday, the commission said growth in the single currency area this year will be 0.8%, the same as its winter interim forecast.
The growth forecast for 2025 has been revised downward from 1.5% to 1.4%.
The European Union is expected to grow by 1.0% this year and 1.6% in 2025, with almost all member states expected to return to growth in 2024.
Official data released on Wednesday confirmed that the currency area emerged from technical recession in the first quarter of 2024.
Gross domestic product increased by 0.3% from the previous quarter, reversing the 0.1% decline in each of the third and fourth quarters of 2023.
On a yearly basis, the economic growth rate improved from 0.1% to 0.4%. The annual figures were also in line with previous forecasts.
The EU estimated that private consumption was the main driver of growth, supported by rising real incomes.
Both imports and exports are expected to increase during this period. Investment is expected to recover more slowly, weighed down by a contraction in housing construction.
Among the Big Four, Germany's economy is expected to stagnate this year. This year's growth rate is expected to remain at 0.1%. The growth rate is expected to rise moderately to 1.0% next year, driven by domestic demand.
Spain's GDP is expected to expand by 2.1%, with domestic demand being the main growth driver. However, next year's real growth rate is expected to slow slightly to 1.9%.
France's economic growth is expected to remain at 0.7% this year, after suffering a noticeable slowdown in the second half of 2023.
Nevertheless, real growth in France is expected to continue gaining momentum and reach 1.3% in 2025, on the back of easing financial conditions and falling inflation.
Italy's GDP is expected to grow by 0.9% in 2024, the same as last year, as government-supported housing investment is replaced by investment in infrastructure and equipment. The growth rate is expected to accelerate further, reaching 1.1% in 2025.
Inflation in the euro area is expected to continue easing over the forecast period. Inflation is expected to fall to 2.5% in 2024 and 2.1% in 2025. These numbers have been revised downward from 2.7% and 2.2% respectively.
The agency said the last mile of the deflation process is expected to be slower and more difficult and will depend primarily on service prices and the outlook for wages and productivity.
The EU said inflation expectations were gradually rising but remained close to the European Central Bank's inflation target.
The unemployment rate is expected to remain broadly stable over the forecast period. The unemployment rate is expected to reach 6.6% this year and 6.5% in 2025.
Written by Renju Jaya
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