By DAVID McHUGH, Associated Press
FRANKFURT, Germany (AP) — The European Union’s executive commission slashed its forecast for economic growth next yr, saying the 19 countries that use the euro currency will slide into recession over the winter as peak inflation hangs on for longer than expected and high fuel and heating costs erode consumer purchasing power.
The European Commission’s autumn forecast released Friday predicts falling economic output within the last three months of this yr and the primary months of 2023. It says high energy prices, a rising cost of living, higher rates of interest and overall uncertainty “are expected to tip the EU, the euro area and most member states into recession within the last quarter of the yr.”
The expansion forecast for all of 2023 was lowered to 0.3% from 1.4% expected within the previous forecast from July.
“Growth is anticipated to return to Europe in spring, as inflation regularly relaxes its grip on the economy,” the report said. “Nonetheless, with powerful headwinds still holding back demand, economic activity is about to be subdued.”
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The worst performer next yr is prone to be Germany, Europe’s largest economy and some of the depending on Russian natural gas before the war in Ukraine. Gas and electricity prices have soared as Russia has dialed back supplies to Europe to a mere trickle of what they were before the invasion of Ukraine.
Germany was expected to see output shrink by 0.6% over the subsequent yr.
Inflation will peak later than expected, near the top of the yr, and can lift the typical rate to eight.5% for 2022 and to six.1% for 2023 within the eurozone. That’s an upward revision of nearly 1 percentage point for 2022 and greater than 2 points for 2023.
Two consecutive quarters of falling output is one common definition of recession, although the economists on the eurozone business cycle dating committee use a broader set of knowledge including employment figures.
The commission indicated the job market was prone to delay relatively well despite shrinking output over the winter, forecasting a rise within the unemployment rate from 6.8% this yr to 7.2% next and a decrease to 7% in 2024.
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