Europe's economy started the new year weaker than expected. The EU Commission is lowering its economic forecast for the third time in a row. She is also lowering her expectations for Germany.
According to a forecast by the EU Commission, the economy in the European Union will grow more slowly this year than recently expected. The authority expects growth of 0.9 percent in 2024, according to an estimate published in Brussels.
This means that the Commission has lowered its forecast for the third time in a row. In the fall, she expected growth of 1.3 percent in the EU. The authority is now also forecasting lower growth in the current year for the Eurozone, which includes fewer countries: instead of the 1.2 percent estimated in the fall, the current estimate is that it will only be 0.8 percent.
“We are closely following geopolitical tensions”
“After a difficult year in 2023, the European economy developed somewhat weaker than expected,” said Commission Vice President Valdis Dombrovskis. However, the recovery is expected to gradually accelerate over the course of the year and into 2025. Inflation continues to fall, and real wage increases combined with a resilient labor market should support consumer demand, said Dombrovskis. “However, the global environment remains very uncertain. We are closely monitoring geopolitical tensions that could negatively impact growth and inflation.”
The EU Commission also scaled down its economic forecast for Germany: According to estimates, the economy in the Federal Republic will grow by 0.3 percent this year. In November, the authority predicted growth of 0.8 percent for the EU's largest economy in 2024.
The EU Commission is still a little more optimistic about Germany than the federal government: it only expects growth of 0.2 percent for 2024. That is “in no way satisfactory,” said Economics Minister Robert Habeck. There must be quick decisions about what the federal government can do.
Improvement only in sight in 2025
In addition, the Commission also lowered its estimate of economic growth last year. It now assumes growth of 0.5 percent in the EU and Eurozone (previously: 0.6 percent). For 2025, the estimate predicts growth of 1.7 percent for the international community and 1.5 percent for the euro countries. For Germany, the Commission continues to expect an increase of 1.2 percent in 2025.
According to the Commission's estimates, annual inflation in the euro zone will weaken faster than expected in autumn – from 5.4 percent in 2023 to 2.7 percent this year and 2.2 percent next year.
