European growth forecast raised to 1.1% after winter recession avoided

May 15, 2023 09:12 AM AEST | By PAMEDIA
Follow us on Google News:

The European Union’s executive body has raised its economic growth forecast, saying Europe has dodged a winter recession that was feared amid an energy crisis.

The outlook for the 20 countries using the euro currency improved to growth of 1.1% this year from 0.9% in the previous predictions in February, the European Commission said in its spring forecast.

The European economy “is holding up remarkably well in the face of Russia’s aggression against Ukraine”, said Executive Vice President Valdis Dombrovskis.

Europe faced expectations of a winter energy catastrophe after Russia cut off most supplies of natural gas to the continent amid the war in Ukraine.

Prices surged to record highs for gas needed to heat homes, generate electricity and power factories — spurring painful spikes in consumer prices.

A mad scramble to line up new sources of natural gas — through more expensive supplies of liquefied gas coming by ship — along with a mild winter and reduced use helped Europe get through the winter without a crisis.

However, Mr Dombrovskis cautioned that ”core inflation remains persistently high, which could erode people’s purchasing power, slow investment growth and impede access to credit”.

Core inflation excludes volatile food and fuel prices and is considered a better measure of price pressures in the economy than the overall div, which reached an annual 7% in April.

Europe’s economy faces persistent challenges from spikes in consumer prices and rising interest rates which the European Central Bank is using to try to return inflation to the bank’s target of 2%.

Higher borrowing costs for consumers and businesses have been reducing the availability of loans for home purchases or business investment and shrinking the demand for loans.

An additional challenge comes from recent turmoil mostly affecting banks in the US, where three financial institutions have collapsed in recent months.

While European officials say their banks are not directly exposed to the US troubles, increased scrutiny of bank finances from regulators and shareholders may make banks even more reluctant to lend.

Banks are the chief sources of financing for companies in Europe, in contrast to the US where financial markets supply the bulk of credit.

The European Commission’s economic growth forecast for next year was raised to 1.6% from 1.5% in the earlier projection.


The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.

Top ASX Listed Companies

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK