EU Returns To Growth As Economic Outlook Improves

EU Returns To Growth As Economic Outlook Improves

Wednesday 15th May 2024 – 10:22 (BST)

The Eurozone economy grew by 0.3% in the first quarter of 2024, rebounding from two quarters of 0.1% contraction and matching earlier estimates. This marks the strongest GDP growth since the third quarter of 2022. Notably, Germany’s GDP increased by 0.2%, recovering from a -0.5% drop, while France and Italy saw growth rates of 0.2% and 0.3%, up from 0.1% each. Spain’s economy maintained a robust 0.7% growth rate, consistent with the previous quarter.

After a stagnant 2023, the Eurozone is now on a recovery path, led by improvements in Germany. Inflation is approaching the European Central Bank’s 2% target, and the European Commission forecasts 0.8% growth for 2024. This growth is supported by rising consumer spending and improved trade, although investment growth appears to be softening. The overall outlook suggests a cautiously optimistic recovery for the region.

Elsewhere, the European Commission Spring 2024 Forecast anticipates a 1.0% GDP growth for the EU in 2024, a slight improvement from the 0.9% forecasted in the Winter 2024 report. The Euro Area’s growth forecast remains steady at 0.8%. Looking ahead to 2025, the EU is projected to achieve a 1.6% growth rate (down from the 1.7% Winter forecast), while the Euro Area is expected to grow by 1.4% (compared to the previous 1.5% estimate).

Euro demand remained buoyant following the news as bets intensify on the ECB cutting interest rates during their next meeting on June 6th.