The European economy narrowly escaped recession at the end of the year, but it shows meager growth of 0.5% over the whole of 2023 and seems mired in stagnation with Germany in a slump.
Euro zone gross domestic product (GDP) remained stable in the fourth quarter of 2023 compared to the previous quarter, after a decline of 0.1% from July to September, Eurostat announced on Tuesday.
The figure is higher than the forecasts of Bloomberg and Factset analysts who expected a decline of 0.1% over the period from October to December and an entry into technical recession, defined by two consecutive negative quarters.
Over the whole of last year, the 20 countries sharing the single currency recorded growth of 0.5% compared to 2022, according to the European Statistics Office, a little less than the 0.6% forecast in November by the European Commission.
Europe pales in comparison to the United States, whose GDP grew by 2.5% in 2023.
It is suffering from high interest rates imposed by the European Central Bank (ECB) to calm record inflation. The contraction in credit is weighing on investment and consumption by businesses and households alike, while exports are suffering from the slowdown in global demand.
Quarter after quarter, the euro zone continued its poor performances, with GDP growth oscillating around zero: “0.1% from January to March,” 0.1% from April to June, then -0.1% and 0%, compared to previous quarters.
The figures were identical for the entire European Union.
But, within the bloc, certain countries have fared better. Spain, driven by tourism, experienced growth of 2.5% last year, and France, at +0.9%. , did better than average.
Europe loses against the United States
Conversely, Germany, the continent’s largest economy, suffered a decline in GDP of 0.3%, weighed down by the crisis in the industrial sector which is suffering from energy costs and weak exports, its strong point. traditional, to the point of being called the sick man of Europe.
The International Monetary Fund (IMF) on Tuesday lowered its growth forecasts for this year in Germany (0.5% against 0.9% so far), in France (1% instead of 1.3%) and for the entire euro zone (0.9% instead of 1.2%).
The European Commission is due to publish its own on February 15. It had so far expected GDP to increase by 1.2% for the euro zone in 2024, but warned in January that geopolitical tensions in the Middle East increased the risks of a downward revision.
“The euro zone economy has generally stagnated since the end of 2022 and has lost a lot of ground compared to the United States in recent years,” estimates Bert Colijn, economist for ING bank. Europe has entered, according to him, “into a phase of prolonged weakness”.
German heavy industry is particularly suffering from the surge in energy prices since Russia’s invasion of Ukraine in February 2022, which led to the tap being turned off from imports of cheap Russian gas, a shock that has escaped the United States, a major producer and exporter of hydrocarbons.
Europe is also penalized by less budgetary support than across the Atlantic, with the recent return to stricter European rules to reduce public deficits, alongside monetary tightening.
The ING bank, however, sees better things on the horizon thanks to the slowdown in inflation and the interest rate cuts that should accompany it.
Consumer price inflation slowed to 2.9% year-on-year in December in the euro zone, far from the peak of 10.6% reached in October 2022. “Real wage growth is slowly starting to recover , which should allow consumers to have more money in their pockets,” underlines Bert Colijn.
But the thinning should only appear in the second half of the year.
“The eurozone economy stagnated in the fourth quarter and we expect it to stagnate in the first half of this year as well, as the effects of past monetary tightening continue to be felt and fiscal policy becomes more restrictive,” he said. said Jack Allen-Reynolds of Capital Economics.