The euro area’s economy has now registered two consecutive quarters of contraction, the outlet says
The 20-nation euro currency bloc will slip into its first recession since the pandemic in the final months of the year, after recording two consecutive quarters of negative economic growth, a Bloomberg poll of analysts revealed on Monday.
Gross domestic product (GDP) in the Eurozone shrank by 0.1% between September and December, compared to the previous forecast of a flat performance, with economists expecting a moderate recovery next year.
“We doubt that we’re at the start of an upswing,” said Joerg Angele, an economist at Bantleon Bank. “Headwinds remain strong, especially the ones stemming from the massive increase of interest rates.”
In its report last week, the statistics agency Eurostat attributed the downturn to shrinking industrial production in the euro area, indicating the region’s enduring weakness.
The recession is largely attributed to the slowdown in Germany, as the EU’s largest economy continues to struggle with a combination of poor external demand, a budget crisis, high interest rates, and a protracted fallout from last year’s energy crisis.
Germany is expected to see a 0.2% downturn in the fourth quarter, more than the 0.1% decline initially projected.
Bloomberg’s survey followed a downward revision of growth in the 20 countries that use the euro as their currency, for the last quarter of 2023.
The results of the poll came in contrast to the European Commission’s November forecast, which predicted the euro area would return to growth in the final months of the year, driven by a retreat in inflation and a strong jobs market.
Economists expect inflation in the Eurozone to ease somewhat only through September 2024, and to remain elevated well above the European Central Bank’s target of 2%.
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