The euro zone economy will grow slower than previously expected this year and next, the European Commission forecast on Monday as consumer demand suffers from high inflation and the biggest economy, Germany, slips into recession this year.
In its interim forecasts for gross domestic product and inflation of the euro zone’s five biggest economies, the Commission said the single currency area’s GDP (gross domestic product) would expand 0.8% in 2023 and 1.3% in 2024, against forecasts of 1.1% and 1.6% respectively made in May.
“Weakness in domestic demand, in particular consumption, shows that high and still increasing consumer prices for most goods and services are taking a heavier toll than expected in the spring forecast,” the Commission said.
“This is despite declining energy prices and an exceptionally strong labour market, which has seen record low unemployment rates, continued expansion of employment, and rising wages,” it said.
The Commission forecast euro zone consumer inflation of 5.6% in 2023 and 2.9% in 2024, both well above the European Central Bank’s target of 2.0%.