EU ECONOMY SET TO AVOID RECESSION BUT HEADWINDS PERSIST The improvement in expectations is largely due to rising natural gas reserves

Both the European Union (EU) and the eurozone should narrowly avoid a technical recession, according to the European Commission’s Winter 2023 Economic Forecast published on Monday.

The growth outlook for 2023 is raised to 0.8 percent for the EU and 0.9 percent for the eurozone, according to the document, which was presented by European Commissioner for Economy Paolo Gentiloni. This is respectively 0.5 and 0.6 percentage points higher than in the Autumn Forecast.

According to the Commission,”Both areas are now set to narrowly avoid the technical recession that was anticipated for the turn of the year.”.

The improvement in economic expectations is largely due to rising natural gas reserves, which has greatly eased EU public concerns about energy supplies in winter.

The European gas benchmark price has fallen below the pre-Russia-Ukraine conflict level, thanks to a drop in demand, the mild weather and gas supply diversification, Gentiloni said.

According to the report, the growth rate for 2024 remains unchanged, at 1.6 percent and 1.5 percent for the EU and the euro area, respectively.

The report also forecast that headline inflation in the EU will fall from 9.2 percent in 2022 to 6.4 percent in 2023, and to 2.8 percent in 2024, and that in the euro area, it is projected to decelerate from 8.4 percent in 2022 to 5.6 percent in 2023 and to 2.5 percent next year.”

Gentiloni also warned that people in the EU will still face a tough period of time. While uncertainty surrounding the European economy remains high, consumers and businesses continue to face high energy costs. Economic growth in the EU is expected to slow down, and high inflation will still have an impact on the purchasing power of the people.