The European Commission has shared updated forecasts which give an indication of the state of the eurozone economy and the European Union as a whole. According to these forecasts, the economy of the whole eurozone is expected to grow by 1.1% in 2023 and 1.6% in 2024. While the European Union is expected to grow by about 1% in 2023 and 1.7% in 2024.
Brussels pointed out that despite some improvement, inflation is still a problem for the European economy, and is expected to peak in 2023. After that, however, the European Central Bank (ECB) expects inflation to fall to 2.8% in 2024. Lower energy prices, a stronger labor market and a normalization of the supply of goods and services are contributing to the improved stability of the economy.
In relation to Luxembourg forecasts for 2023 were less optimistic, with only 1.6% growth expected. This is due to a decline in individual consumption and general weakness in investment flows in the country. Amongst the reasons for this trend is the tight financial policy pursued by the Central Bank of Luxembourg and the European Central Bank. Nevertheless, Brussels also commented that if the forecasts hold true, the need for such harsh measures could be reduced.
A slowdown in economic growth is expected to have an impact on the labor market, but it will still remain stable. The unemployment rate is forecast to rise slightly, from 4.6% at present to 4.8% by the end of this year and to 5% in 2024.
It should be noted, however, that economic forecasts are always fraught with risk and are not always justified. External factors such as global economic developments, political instability or changes in international trade could have a significant impact on the economic situation in the euro area and the European Union.
Overall, the European Commission's forecasts point to an expected slowdown in economic growth in the euro area and the European Union. However, labour market stability and some positive factors, such as lower energy prices and the normalisation of supply, could help to maintain the resilience of the region's economies.