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Eurozone Economy Growth Slowed, Inflation Eases Faster Than Expected Amid Uncertainty

According to the latest European Commission forecast released on Wednesday, while the organization maintained its prediction from February that the Eurozone economy will grow by 0.8% in 2024, it acknowledged that inflation is likely to decelerate more rapidly toward the European Central Bank’s target. The Commission stated that uncertainty and downside risks have increased in recent months due to the ongoing war in Ukraine and conflicts in the Middle East. The largest Eurozone economy, Germany, is expected to barely grow this year, expanding only 0.1% after a 0.3% recession in 2023 and growing by 1.0% in 2025. The Commission also reduced its forecast for French growth in 2024 to 0.7%, down from its previous estimate of 1.2%, and lowered its prediction for 2025 to 1.3% from 1.4%. Consumer inflation is expected to slow down to 2.5% in 2024 from 5.4% in 2023, and then to 2.1% in 2025. The speed of disinflation, however, remains uncertain, and the Commission suggested that some member states may enact additional fiscal consolidation measures in their 2025 budgets, potentially affecting economic growth in 2025. The organization also noted that the Eurozone budget consolidation this year is likely to be less ambitious than previously anticipated, and public debt is expected to remain unchanged at 90.0% of GDP in 2024 compared to 2023. The aggregated Eurozone budget deficit is forecasted to decrease to 3.0% of GDP in 2024 and then to 2.8% in 2025. The European Central Bank aims to maintain consumer inflation at 2.0% over the medium term.

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