Lower energy prices and a strong labour market supported moderate growth in the first quarter of 2023, dispelling fears of a recession, according to the European Commission spring economic forecast published Monday.
The European economy has managed to contain the adverse impact of Russia’s war against Ukraine, weathering the energy crisis thanks to a rapid diversification of supply and a sizeable fall in gas consumption.
Markedly lower energy prices are working their way through the economy, reducing firms’ production costs. Consumers are also seeing their energy bills fall, although private consumption is set to remain subdued, it said.
This better-than-expected start to the year lifts the growth outlook for the EU economy to 1.0 percent in 2023 and 1.7 percent in 2024.
Upward revisions for the euro area are of a similar magnitude, with GDP growth now expected at 1.1 percent and 1.6 percent in 2023 and 2024 respectively.
After peaking in 2022, inflation continued to decline in the first quarter of 2023 amid a sharp deceleration of energy prices.
In March inflation reached a historic high of 7.6 percent, but it is projected to decline gradually over the forecast horizon as profit margins absorb higher wage pressures and financing conditions tighten.
Source: Kuwait News Agency