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The EU economy will grow less than previously forecast this year, the European Commission has said, as it unveiled fresh downgrades to its GDP expectations owing to high inflation and sluggish business activity weighing on the bloc’s markets.
Finding ways to kick-start the EU’s moribund economy and falling global competitiveness has become the commission’s most pressing task, as growth remains tepid despite a €800bn stimulus programme rolled out across the bloc.
Both the EU and the eurozone will grow 0.6 per cent in 2023, the commission said on Wednesday, 0.2 percentage points lower than expected in its September forecast, and the second consecutive cut this year.
The EU economy will grow 1.3 per cent in 2024, the commission forecast, down 0.1 percentage point less than previously expected. The eurozone’s economy is expected to expand by just 1.2 per cent next year, a downward revision from 1.3 per cent.
Stubbornly high inflation, triggered first by the Covid-19 pandemic and then the energy shock following Russia’s invasion of Ukraine, and the economic fallout of the conflict, have hamstrung European output over the past few years, with growth falling further behind the US.
Mario Draghi, the former Italian prime minister and president of the European Central Bank, told the FT last week: “It is almost sure [that Europe is] going to have a recession by the year-end.”
The commission said inflation remained “on a downward trend” and would fall from 6.5 per cent this year to 3.5 per cent in 2024.
“Uncertainty and downside risks to the economic outlook have increased in recent months amid Russia’s protracted war of aggression against Ukraine and the conflict in the Middle East,” the commission said in a statement.
“So far, the latter’s impact on energy markets has been contained, but there is a risk of disruptions to energy supplies that could potentially have a significant impact on energy prices, global output and the overall price level. Economic developments in the EU’s major trading partners, especially China, could also pose risks,” it added.
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