The European Commission has lowered its forecast for economic growth next year, saying 19 countries that use the euro will fall into recession over the winter as peak inflation lasts longer than expected and high oil prices fuel and heating will sap consumers’ purchasing power, AP reported.
The European Commission’s autumn forecast foresees a decline in economic output in the last three months of this year and the first months of 2023. It notes that high energy prices, the rising cost of living , rising interest rates and overall EU uncertainty will drag the Eurozone and most member states into recession in the last quarter of the year.
The growth forecast for the whole of 2023 was lowered to 0.3% from 1.4%. “Growth is expected to return to Europe in the spring as inflation gradually weakens its impact on the economy, the report said.
However, with strong headwinds still dampening demand, economic activity will be suppressed.
Germany, Europe’s largest economy and one of the most dependent on Russian natural gas, is expected to have the worst performance next year.
German production is expected to fall by 0.6% next year.
Inflation will peak later than expected, closer to the end of the year, averaging 8.5% in 2022 and 6.1% in 2023 in the euro area.
Two consecutive quarters of falling output is a common definition of a recession, although economists from the Eurozone Business Cycle Dating Committee use a broader set of data, including employment figures.