The risk of recession looms in the eurozone

The Eurozone is preparing to turn the year into a recession scenario and with the risk of recession at the beginning of 2024, due to the weight of inflation and interest rates that have reached high values. However, there are expectations of a slight improvement in the second half of the year.

The one-tenth contraction in the third quarter of this year has already been highlighted by Eurostat data, as well as by indicators compiled by Standard & Poor’s Global, which in November recorded six consecutive monthly declines in business activity, more in industry than in services.

What we see is that there is almost no growth engine in Europe,” says chief economist for Europe at Oxford Economics, Angel Talavera, quoted by EFE. Everything is basically at a standstill.” Therefore, he expects that “in general, the European economy will remain very weak” at the beginning of next year.

The weaker situation in Germany has contributed significantly to the current scenario, which is primarily characterized by an industry slowdown, which is affecting the whole of Europe and is expected to continue into next year.

The picture is so gray that the European Commission itself worsened its estimates of eurozone GDP for this year (0.6%) and for 2024 (1.2%), in its latest forecasts, while the European Central Bank updated its bearish estimates this week.

He concludes by saying: “I do not think that we will have a significant impact in 2024, because in general, interest rate movements are transmitted to the economy with a certain delay (…) and this will give a certain impetus to growth, but more so in 2025.” Talavera, referring to the possibility of lower interest rates.