According to the spring forecast, the European Commission estimates economic growth at 3.2% for this year and 3.5% for 2024. Note that in the winter of 2023, 2.5% was expected.

Estimated inflation for 2023 is 9.7%, the percentage is maintained.

As for the budget deficit, the European Commission expects 4.7% of GDP in 2023 and 4.4% in 2024.

The expected public debt is 45.6% of GDP in 2023 and 46.1% in 2024.

Note that the current data on the public debt show that the 50% threshold was exceeded in February 2023.

Referring to the European economy, the EC said: “Falling energy prices, easing supply constraints and a strong labor market supported moderate growth in the first quarter of 2023, allaying recession fears.”

“This better-than-expected start raises the EU economic growth forecast to 1% in 2023 (compared to 0.8% in the interim winter forecast) and to 1.7% in 2024 (compared to 1.6% in the winter forecast )”, the cited source mentions.

The upward revision for the Eurozone is of a similar magnitude, with GDP growth currently estimated at 1.1% in 2023 and 1.6% in 2024.

Against the background of continued pressure on core prices, inflation was also revised upwards compared to the winter scenario, reaching 5.8% in 2023 and 2.8% in 2024 in the euro area.

Eurozone GDP increased

According to Eurostat’s preliminary signal estimate, GDP grew by 0.3% in the EU and by 0.1% in the euro area in the first quarter of 2023. According to advance indicators, this growth should continue without a break in the second quarter.

“The European economy managed to limit the negative impact of Russia’s war of aggression against Ukraine by coping with the energy crisis by rapidly diversifying its supplies and significantly reducing gas consumption,” the Commission notes.

• A significant decrease in energy prices affects the entire economy, which leads to a decrease in production costs for enterprises. In turn, consumers are seeing lower energy bills, although private consumption should remain low as wage growth remains below inflation.

“Given that inflation remains high, financing conditions will be even tighter. While the ECB and other EU central banks are expected to be nearing the end of their interest rate hike cycle, the recent turmoil in the financial sector is likely to increase pressure on the cost and access to credit, slowing investment growth, especially in the housing sector,” the quoted source said. .

• Despite the introduction of support measures to mitigate the impact of high energy prices, strong nominal growth and the lifting of the last measures left over from the pandemic caused the EU’s aggregate government deficit to fall further to 3.4% of GDP in 2022.

• In 2023 and, more importantly, in 2024, falling energy prices will allow governments to phase out energy support measures, leading to a further narrowing of the deficit to 3.1% and 2% respectively, 0.4% of GDP.

• The EU-wide debt-to-GDP ratio is projected to fall steadily below 83% in 2024 (90% in the euro area), but remain above pre-pandemic levels. There is great heterogeneity of budget trajectories in the member states.

“While inflation may support an improvement in public finances in the short term, this effect will fade over time as debt servicing costs rise and government spending gradually adjusts to higher price levels,” the Commission says.