Spring forecast projects 1% 2024 GDP growth in EU, 0.8% in euro area

EU GDP growth is forecast to improve to 1.6 per cent in 2025, a downward revision of 0.1 percentage point (pp) from winter. In the euro area, GDP growth in 2025 is projected to be slightly lower, at 1.4 per cent—also marginally revised down.

Almost all EU member states are expected to return to growth this year. With economic expansion in the southern rim of the EU still outpacing growth in north and western Europe, economic convergence within the EU is set to progress further.

The EU economy staged a comeback at the start of the year, following a prolonged period of stagnation. Though the growth rate of 0.3 per cent estimated for the first quarter (Q1) this year is still below estimated potential, it exceeded expectations.

Activity in the euro area expanded at the same pace, marking the end of the mild recession experienced in the second half last year. Meanwhile, inflation across the EU cooled further in Q1 2024.

Economic activity broadly stagnated in 2023 in the bloc and private consumption only grew by 0.4 per cent. Despite robust employment and wage growth, labour incomes barely outpaced inflation.

With prolonged weakness in the manufacturing sector leaving many plants operating below normal capacity utilisation rates, equipment investment is expected to expand only marginally this year, before accelerating in 2025, said the spring forecast’s executive summary.

Notwithstanding evidence of cooling demand, the labour market remains tight. The unemployment rate continued falling in EU member states recording the highest rates, resulting in continued decline of dispersion across countries.

The EU economy, however, is still expected to generate another 2.5 million jobs, while the unemployment rate should hover around the current record-low rates.

In a lacklustre trade environment, the EU as a whole managed to gain export market shares, though some member states continued to register important losses.

Looking forward, global growth (excluding the EU) is set to remain at close to 3.5 per cent over the forecast horizon. For the world as a whole, growth is projected to edge up from 3.1 per cent in 2023 to 3.2 per cent in 2024 and 3.3 per cent in 2025. This is a marginally upward revision compared to the winter forecast.

As in 2023, eleven member states are projected to record a general government deficit exceeding 3 per cent of GDP in 2024, dropping to nine in 2025. The EU fiscal stance turned neutral in 2023, after significant expansion in the 2020-22 period. It is set to be contractionary in 2024 and to turn broadly neutral in 2025.

Fibre2Fashion News Desk (DS)