Winter 2023 Economic Forecast: EU economy set to avoid recession but headwinds persist

The Winter interim Forecast lifts the growth outlook for this year to 0.8 per cent in the EU and 0.9 per cent in the euro area.

Both areas are now set to narrowly avoid the technical recession that was anticipated for the turn of the year. The forecast also slightly lowers the projections for inflation for both 2023 and 2024.

Outlook improves thanks to enhanced resilience

Following robust expansion in the first half of 2022, growth momentum abated in the third quarter, although slightly less than expected. Despite exceptional adverse shocks, the EU economy avoided the fourth-quarter contraction projected in the Autumn Forecast.

The annual growth rate for 2022 is now estimated at 3.5 per cent in both the EU and the euro area.

Headwinds, however, remain strong. Consumers and businesses continue to face high energy costs and core inflation (headline inflation excluding energy and unprocessed food) was still rising in January, further eroding households’ purchasing power.

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