According to a Bloomberg survey of economists, the eurozone’s 20-nation currency bloc will enter its first recession since the Depression in the last months of the year, following two consecutive quarters of negative economic growth.
The Eurozone’s GDP fell by 0.1% between September and December, contrasting to the previous prediction of a flat performance, with economists predicting a small recovery next year.
“We doubt that we’re at the start of an upswing,” said Joerg Angele, an economist with Bantleon Bank. “Headwinds remain strong, especially the ones stemming from the massive increase of interest rates.”
In its report last week, the statistics agency Eurostat attributed the downturn to shrinking industrial production in the euro area, indicating the region’s enduring weakness.
The recession is largely attributed to the slowdown in Germany, as the EU’s largest economy continues to struggle with a combination of poor external demand, a budget crisis, high interest rates, and a protracted fallout from last year’s energy crisis.
Germany is likely to have a 0.2% decline in the fourth quarter, up from the 0.1% decline first forecast.
Bloomberg’s study came after a downward revision of growth in the 20 eurozone countries for the fourth quarter of 2023.
The poll’s findings contradicted the European Commission’s November estimate, which expected that the eurozone will return to growth in the final months of the year, owing to lower inflation and a healthy labour market.
Economists predict Eurozone inflation to reduce slightly only through September 2024, and to remain significantly above the European Central Bank’s objective of 2%.
