The eurozone’s inflation rate, which reached a record 10.6 percent in October due to rising energy and food prices triggered by Russia’s war against Ukraine, is expected to fall to 5.6 percent in 2023 and 2.5 percent in 2024.
This would be a less significant slowdown than previously predicted last autumn, which was 6.1 percent for this year and 2.6 percent for 2024. This has been stated in the EU Winter 2023 Economic Forecast.
However, Economy Commissioner Paolo Gentiloni cautioned against reading it as the EU fully recovered.
“We have a better-than-expected outlook, less negative than expected situation; this doesn’t mean we have a positive overall outlook,” Mr. Gentiloni stated,” adding that expected growth is under one percent and inflation is still high, the EUobserver reported.
At the same time, the prediction defies past fears of “stagflation, deep inflation, and blackouts,” according to the Italian ex-premier.
Gentiloni said it was “impressive” that the EU lowered its energy consumption by 25 percent in October and November last year, with the help of mild winter, thus diminishing energy dependence on Russia.
Nonetheless, the war remains the most severe threat to the EU’s economy.
“The major danger to this forecast is based on the geopolitical tensions and the evolution of the war,” Mr. Gentiloni said, adding that “this offers to the economy, investors, and corporations a high degree of uncertainty.”
The estimate is based on the assumption that Russia’s aggression against Ukraine “will not escalate, but will remain,” according to the report.
At the same time, the commission warned that core inflation, which excludes energy and food prices since they are far more volatile, was still increasing in January and had yet to peak.
Labor markets have remained solid, with the EU unemployment rate at an all-time low of 6.1 percent in December.
Sweden is the only EU nation that has experienced a recession this year (0.8 percent). Germany and Italy, both heavily reliant on Russian energy, are expected to grow by 0.2 percent and 0.8 percent this year.
In 2023, France will expand by 0.6 percent, while Spain will grow by 1.4 percent.
Despite the arguments of pro-Kremlin influencers, this report and projection demonstrate that the EU economy can thrive and prosper without Russian energy resources.