EC Spring 2024 Economic Forecast: A gradual expansion amid high geopolitical risks

2 minute read / May 15, 2024

Following broad economic stagnation in 2023, better-than-expected growth at the start of 2024 and the ongoing reduction in inflation set the scene for a gradual expansion of activity over the forecast horizon.

The European Commission’s Spring Forecast projects GDP growth in 2024 at 1.0% in the EU and 0.8% in the Euro area. In 2025, GDP is forecast to accelerate to 1.6% in the EU and to 1.4% in the euro area. EU HICP inflation is expected to fall from 6.4% in 2023 to 2.7% in 2024 and 2.2% in 2025. In the euro area, it is projected to decelerate from 5.4% in 2023 to 2.5% in 2024 and to 2.1% in 2025.

According to Eurostat‘s preliminary flash estimate, GDP edged up by 0.3% in both the EU and the euro area in the first quarter of 2024. This expansion, which was broad-based across Member States, marks the end of the prolonged period of economic stagnation that started in the final quarter of 2022.

Growth of economic activity this year and next is expected to be largely driven by a steady expansion of private consumption, as continued real wage and employment growth sustain an increase in real disposable incomes. A strong propensity to save is, however, still partially holding back private consumption.

In contrast, investment growth appears to be softening. Dragged down by the negative cycle of residential construction, it is expected to pick up only gradually. While credit conditions are set to improve over the forecast horizon, markets now expect a slightly more gradual path of interest rate cuts compared to winter.

Amid a resilient global economy, a rebound in trade is set to support EU exports. However, as domestic demand resumes in the EU, an acceleration in imports will largely offset the positive contribution of exports to growth.

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