The EU predicted on Wednesday that euro zone inflation will accelerate further in 2024, but warned that the single currency area's economy still faces risks from geopolitical tensions, including wars in Ukraine and Gaza. did.
The European Commission expects inflation to fall to 2.5% in 2024, down from its previous forecast of 2.7%, and the European Central Bank (ECB) is expected to welcome the news. .
But the EU's executive body said it expected growth in the 20-nation eurozone to slow to 0.8% in 2024, unchanged from its February forecast.
The European Central Bank (ECB) has halted an aggressive interest rate hike campaign launched in response to Russia's 2022 attack on Ukraine.
The central bank is widely expected to cut interest rates in June as falling inflation and rising borrowing costs hit the eurozone.
“The last mile of the deflation process could become more difficult in the EU,” said Paolo Gentiloni, the EU's economic commissioner.
As a result, “the monetary authorities may ease monetary policy at a slower pace than the market currently expects.”
Moscow's invasion sent inflation to record levels and soared energy costs, forcing Europe to scramble to find an alternative source of energy to Russia.
– “High uncertainty” –
Gentiloni looked upbeat, pointing to April EU statistics that showed the eurozone economy grew by 0.3% in the first quarter of 2024.
“We now think we have turned a corner,” Gentiloni said. “We expect growth to pick up this year and further accelerate next year. Meanwhile, inflation will fall further and by 2025 the ECB We will reach that goal.”
But he warned that this forecast faced “downside risks” not only from an escalating war but also from multiple elections around the world, including in the United States, later this year.
Brussels forecasts growth of 1.0% in 2024 and 1.6% in 2025 for the 27-nation European Union as a whole.
The EU is in a tougher situation than the US and China, which posted higher growth rates in 2023 and the first three months of 2024.
Public finances also remain under pressure in the area of the single currency.
The debt-to-GDP ratio is expected to remain at 90% this year, but rise to 90.4% by 2025, well above the 60% cap set by EU fiscal rules.
～Stagnation of German economy～
The committee also predicted that inflation would continue to decline, reaching 2.1% in 2025, well within the ECB's target of 2%.
“Disinflation is expected to be driven primarily by non-energy products and food, but energy inflation will rise modestly and service inflation will decline only modestly in parallel with easing wage pressures,” the ministry said in a statement.
The EU is hopeful that next year will be better, but Brussels has revised its 2025 growth forecast for the euro zone slightly lower to 1.4% from the previous 1.5%.
“We expect growth to accelerate moderately this year and into next as consumer spending is supported by lower inflation, a rebound in purchasing power and continued employment growth,” Gentiloni said in a statement. Ta.
The weak German economy has been a drag on the euro zone as a whole, and Wednesday's forecast did not paint a positive picture for the euro zone's economic powerhouse.
The committee forecast that Germany's growth rate in 2024 will be just 0.1%, down from its previous forecast of 0.3%.
France, the EU's second-largest economy, is performing well, with its growth rate expected to be 0.7% in 2024, but this was lower than the previously expected growth rate of 0.9%.
Raz/RMB/LTH
