Important points
- The European Union (EU) has cut its forecast for euro zone economic growth in 2023 from 0.8% to 0.6%, although it expects the eurozone economy to avoid recession.
- The euro zone economy could recover next year as inflation eases on the back of a strong labor market.
- The EU has warned that wars between Russia and Ukraine and Israel and Hamas have increased uncertainty and downside risks.
The European Union has cut its growth forecast for the eurozone economy this year to 0.6% from the 0.8% forecast in September. is not expected.
High inflation, rising interest rates and weak external demand are contributing to this year's economic challenges, but the EU expects growth to rise to 1.2% next year and further growth in 2025 as inflation eases on the back of a strong labor market. suggested it could recover to 1.6%.
The EU expects inflation to slow to an annual rate of 3.2% in 2024 and 2.2% in 2025, down from this year's average of 5.6%. The European Central Bank's medium-term inflation target is 2%.
But efforts to reduce public debt in some of the region's biggest economies are losing momentum, EU officials have warned. Debt has soared as governments borrowed heavily during the pandemic and energy crisis, while interest rates rose to curb inflation.
Wars between Ukraine and Russia and Israel and Hamas have increased uncertainty and downside risks. The impact of China's economic recovery and the spillover of monetary tightening could also impact forecasts, the report said.
