FX.co ★ Eurozone Growth Outlook Downgraded; Inflation To Slow Faster

The European Commission has released its Winter interim forecast, predicting a slow recovery for the Eurozone economy this year. However, there is an expected significant slowdown in inflation due to decreasing energy prices.

The prediction for the expansion of the single currency bloc has been lowered to only 0.8 percent this year, a drop from the previous 1.2 percent forecast in the Autumn. Similarly, the growth forecast for 2025 has seen a slight cut from 1.6 percent to 1.5 percent.

The EU notes that the region entered 2024 on shaky grounds. The outlook for the first quarter remains modest, even though the economy narrowly avoided a recession in the latter half of 2023. Despite this, the EU suggests the potential for a gradual increase in economic activity throughout this year.

Inflation predictions for 2024 have also been reduced, from 3.2 percent to 2.7 percent, while the outlook for the following year remains at 2.2 percent.

Germany's real GDP is expected to advance by 0.3 percent in 2024, a decrease from the earlier predicted 0.8 percent. The forecast for 2025 remains at a growth of 1.2 percent. Meanwhile, France's GDP growth for 2024 is likely to experience only slight growth of 0.9 percent, a decrease of 0.3 percent.

In 2025, Spain's GDP is set to rise 1.3 percent, just under the autumn forecast of 1.4 percent. However, the prediction for Spain's real growth in 2024 remains constant at 1.7 percent due to a mix of factors, with hopes of acceleration next year to the unchanged prediction of 2.0 percent. This expected uptick will purportedly be driven by investment growth and a positive boost from external demand.

Lastly, Italy's GDP is forecasted to experience mild expansion of 0.7 percent in 2024, spurred by investment and household spending. However, this predicted growth reflects a decrease from the initial forecast of 0.9 percent. The outlook for 2025 remains steady with expected real GDP growth of 1.2 percent.