EU Dodges a Bullet: The Inflation Seems Likely to Calm

EU Dodges a Bullet: The Inflation Seems Likely to Calm

According to the European Commission’s newest prediction, the EU’s economy will “narrowly” avoid a much-feared recession this year as inflation eases and gas prices continue their sharp decrease, clearing the way for better-than-expected economic performance.

The study, issued on February 13th, provides a ray of hope in an otherwise exceedingly unpredictable and tough situation, which is inextricably linked to what steps Russia will take next in its invasion of Ukraine, which is approaching its one-year anniversary. Yet, the European Commission predicts that the EU will grow at a 0.8% annual pace in 2023, up from 0.3% in the previous prediction.

It Seems the Growth of the Eurozone will not Protect from the Decline 

“Better than predicted does not imply that it is excellent, and the future is, of course, policy-dependent,” said Paolo Gentiloni, European Commissioner for the Economy, while giving the assessment. “Europeans nonetheless face a challenging period ahead, with GDP projected to be modest and inflation expected to gradually release its hold on buying power.”

EU Dodges a Bullet The Inflation Seems Likely to Calm

In the meanwhile, the Eurozone will grow by 0.9%, up from the 0.3% forecast in the fall. But a technical recession is defined as two-quarters of economic decline, which may still occur in several EU nations even if the final figure for 2023 is positive.

How Will the EU Beat Inflation and Turn The Corner?

The European Commission believes the EU has turned the corner on record-breaking inflation and that prices will continue to fall, as they did late last year when the closely monitored index reverted to single digits. The trend was connected to a gradual drop in European gas costs as a consequence of coordinated power conservation, mild weather, and supplier diversity.

The Title Transfer Facility (TTF), Europe’s primary gas trading center, concluded on Friday at over €54 per megawatt-hour, the highest amount since December 2021. Inflation in the Eurozone is now expected to decline to 5.6% in 2023 and 2.5% in 2024, bringing the rate closer to the European Central Bank (ECB) ’s 2% annual objective.

Yet, the officials warn that core inflation, which includes volatile energy and food costs, has not yet peaked, and the burden of high energy bills has not been fully passed on to consumers.

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