The eurozone entered a technical recession at the start of the year when GDP fell for two consecutive quarters by 0.1% in January-March after a similar drop in October-December, according to revised figures released by Eurostat on Thursday, AFP reported. .

The European Statistics Institute had previously expected stagnation (0%) in the last quarter of 2022 compared to the previous quarter and growth of 0.1% in the first quarter of 2023.

The downward revision (unexpected) is largely due to what happened in Germany when the EU’s “economic engine” went into recession.

The latest data cast a shadow over the prospects of the Eurozone for the whole year. In mid-May, the European Commission forecast growth of 1.1% in 2023 in the 20 countries that have a single currency.

The figure now looks “optimistic”, Charlotte de Montpellier, an economist at ING Bank, told AFP. It expects only 0.5% for the whole year.

“Since the spring, all the data have been bad,” she said, recalling, in particular, the situation with German factories and new industrial orders. In her opinion, “the European economy is in a stage of stagnation and barely made it through the winter due to the energy shock.”

Although gas and oil prices have fallen in recent months, last year’s price hike had a serious impact on household confidence, reducing consumption.

Inflation remained high at 6.1% in May despite easing, and rising prices are now affecting food, manufacturing and services.

The European economy is also affected by the increase in interest rates by the European Central Bank, which means a reduction in the demand for loans and a slowdown in investment, especially in real estate, which leads to a decrease in construction activity.

A slowing economy in the United States and a weaker-than-expected recovery in China are also weighing on European exports.

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