European economy expected to grow faster than forecast, state EU economists

May 22, 2023

European economy expected to grow faster than forecast, state EU economists

Europe’s economy is expected to grow faster than previously thought this year and next, despite high inflation and rising interest rates, according to the latest figures from the European Commission.

The commission said the EU’s 27 members would grow at an average of 1% in 2023, up from a previous estimate of 0.8%. It nudged its forecast for growth in 2024 to 1.7% from 1.6%. With this information, the eurozone’s 20 members are expected to grow by 1.1% on average and 1.6% next year.

By comparison, the UK economy is expected to be weaker, with growth of 0.25% expected this year and 0.75% in 2024, according to the latest figures published by the Bank of England.

With fears of a recession easing, EU growth so far this year has been much stronger than expected when the last growth estimates were made in February. Ireland will lead the EU growth league over the next two years as it has done for the past two years.

Dublin is forecast to enjoy a growth rate of 5.5% and 5% in 2023 and 2024, respectively, after amassing a growth rate of 13.6% in 2021 and 12% in 2022.

France’s growth rate will accelerate from 0.7% in 2023 to 1.7% in 2024 while Germany’s economy, which was hit hardest by sanctions on Russian gas, is expected to expand by 0.2% this year and 1.4% next year.

Estonia and Sweden are the only EU countries to suffer a contraction this year – Sweden by 0.5% and Estonia by 0.4%, before both make modest recoveries in 2024.

For the first time, European Commission officials have examined the prospects for Ukraine’s economy in its quarterly forecast – a move made in response to Brussels accepting the war-torn country as a candidate for EU membership last year.

In this time period, Ukraine had demonstrated a remarkable resilience during the war and much of its economy was able to continue operating.

Ukraine’s GDP is estimated to have slumped by 29% in 2022. This year growth is expected to be just 0.6%, rising to 4% in 2024, the commission said, although the ongoing path of the war will be crucial to the outcome for expected economic growth.

China’s economic data misses expectations as economy continues to show an uneven path to recovery

China’s economic data for April missed expectations as the economy continued to show an uneven path of recovery from the impact of its stringent Covid restrictions.

Industrial production for April rose by 5.6% year-on-year, compared to the 10.9% expected by economists surveyed in a Reuters poll. The figure was up 3.9% in March following a muted start to the year.

Retail sales rose by 18.4% – lower than economists’ forecast of a surge of 21%. Fixed asset investment rose by 4.7%, against expectations of 5.5%. The reading rose 5.1% the previous month.

China stocks have pared most of the gains seen this year. The Shenzhen Component was down 4.67% quarter-to-date and up only 1.48% year-to-date, seeing a 9.5% drop from its peak in early February.

China’s latest data follows a mixed picture in the country’s growth trajectory, with services remaining a bright spot in the economy despite factory data falling into contractionary territory in April.

The Caixin China general manufacturing purchasing managers’ index fell to 49.5 in April, marking the first reading below the 50-mark in three months. The 50-point mark separates growth from contraction.

The National Bureau of Statistics’ manufacturing PMI also fell to 49.2 in April from March’s reading of 51.9.Imports for the month also plunged further by 7.9%, missing estimates – exports rose 8.5%.

The latest data included a 20.4% youth jobless rate, the unemployment rate between ages 16 and 24. The reading in April marked a record high.

Citi economists said youth unemployment remains a consistent problem, despite an overall steady labour market – with the latest data showing that the surveyed jobless rate dipped to 5.2% in April from 5.3% in March.

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