MNI BRIEF: Brussels Cuts Growth Forecast; Inflation Seen Lower

The European Commission has revised growth down in its autumn forecasts but sees a gradual recovery in economic activity going forward, with inflation now seen modestly lower across 2025 compared to the previous projections.

The latest forecasts, published Wednesday, put growth in 2023 at 0.6% for both the EU and euro area, 0.2 percentage points lower than the summer forecast.In the euro area, GDP growth is projected to be slightly lower, at 1.2% in 2024. In 2025 euro area growth is forecast to strengthen to 1.7% as inflation and the impact of higher rates subsides.

Headline inflation in the euro area is projected to fall from 5.6% in 2023 to 3.2% in 2024 and 2.2% in 2025. Inflation is forecast to continue easing after falling to two-year low in October. The Commission says that the fall in inflation, which had been mainly driven by a sharp drop in energy prices, is now increasingly broad based and no longer driven by energy and food.

"As monetary tightening works its way through the economy, inflation is set to continue declining, though at a more moderate pace, reflecting a slower, but more broad-based, easing of inflationary pressures in food, manufactured goods and services," the commision said.