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EU Projects Eurozone To Log Gradual Growth, Inflation On Track To Target

The European Commission projected the euro area economy to stage a gradual growth amid geopolitical risks and expects inflation to be on the track to hit the target.

In the latest Spring economic forecast, released Wednesday, the commission said the single currency bloc will grow 0.8 percent this year, same as the Winter interim forecast.

For 2025, the growth outlook was revised down to 1.4 percent from 1.5 percent.

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The European Union is forecast to grow 1.0 percent this year and 1.6 percent in 2025. Almost all member states are forecast to return to growth in 2024.

Official data released on Wednesday confirmed that the currency bloc emerged from a technical recession in the first quarter of 2024.

Gross domestic product grew 0.3 percent sequentially, reversing the 0.1 percent falls each in the third and fourth quarters of 2023.

On a yearly basis, economic growth improved to 0.4 percent from 0.1 percent. The annual figures also came in line with the previous estimate.

The EU estimated private consumption as the key growth driver of growth, helped by rising real incomes.

Both exports and imports are also forecast to grow over the period. Investment is forecast to pick up more gradually, weighed down by the downsizing in residential construction.

Among the big-four, the German economy is expected to stagnate this year. Growth is seen at a modest 0.1 percent this year. Driven by domestic demand, growth is expected to rise moderately to 1.0 percent next year.

Spain GDP is projected to expand 2.1 percent with domestic demand set to be the main growth driver. However, real growth is set to slightly decelerate to 1.9 percent next year.

France’s economic growth is forecast to remain subdued this year at 0.7 percent after a notable slowdown in the second half of 2023.

Nonetheless, on the back of looser financial conditions and lower inflation, France’s real growth is projected to keep gaining momentum to hit 1.3 percent in 2025.

Italy’s GDP growth is expected to grow 0.9 percent in 2024, the same as in the previous year as government-supported residential investment is replaced by investment in infrastructure and equipments. Growth is set to accelerate further to 1.1 percent in 2025.

Eurozone inflation is projected to continue easing over the forecast period. Inflation is expected to fall to 2.5 percent in 2024 and 2.1 percent in 2025. These figures were downwardly revised from 2.7 percent and 2.2 percent, respectively.

The agency said the last mile of the disinflationary process is set to be slower and more challenging, and mainly hinges upon services prices as well as on the outlook for wages and productivity.

The EU observed that inflation expectations have edged upwards but are still close to the European Central Bank’s inflation target.

Unemployment rates are expected to remain broadly stable over the forecast horizon. The jobless rate is seen at 6.6 percent this year and 6.5 percent in 2025.

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