The eurozone is on the verge of a winter recession, with the most recent official data revealing a 0.1% contraction in its economy during the third quarter of 2023.
In a performance worse than anticipated, the 20-nation currency bloc has now experienced lackluster growth in three of the last four quarters, resulting in an economy only 0.1% larger than it was a year earlier.
Despite a significant drop in the eurozone’s annual inflation rate from 4.3% in September to 2.9% in October, business surveys indicate ongoing weakness, raising concerns about a recession, defined by two consecutive quarters of declining gross domestic product.
Factors contributing to this economic slowdown include higher interest rates from the European Central Bank, the impact of inflation on consumer spending power, and weakened exports due to a slowing global economy, which have collectively led to the stagnation of the eurozone over the past year.
The broader Eurozone’s Economy grew by 0.1% in the third quarter, remaining 0.1% larger than the same period in 2022
Among the eurozone’s major economies, Germany contracted by 0.1%, France grew by 0.1%, Italy remained unchanged, and Spain showed growth of 0.3%. Ireland experienced the most significant contraction (-1.8%), while Latvia (+0.6%) and Belgium (0.5%) posted the strongest growth. Excluding Ireland’s sharp contraction, eurozone GDP remained unchanged.
Bert Colijn, the senior eurozone economist at ING bank, mentioned that a decline in eurozone GDP makes a small technical recession in the second half of 2023 a realistic possibility. Despite falling inflation, the European Central Bank is not expected to cut rates soon.
The sharper-than-expected drop in the eurozone’s annual inflation rate was primarily due to movements in food and energy prices, with core inflation (excluding food and energy) decreasing from 4.5% to 4.2%.
Jack Allen-Reynolds, the deputy chief eurozone economist at the consultancy Capital Economics, expressed concerns about the poor outlook, stating that the eurozone economy contracted in the third quarter.
Analysts anticipate that the European Central Bank, which has raised interest rates by a total of 4.5 percentage points since the summer of 2022, will likely keep borrowing costs unchanged despite the recent decline in the eurozone’s inflation rate.
According to The Guardian.
By. Pham Thanh Bien
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