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More Upbeat EC Winter Forecast Narrowly Avoids Recession

MNI (London)

The European Commission's Winter '23 forecast was more upbeat, lifting growth expectations for the euro area to +0.9% in for 2023 (+0.8% in EU) and implying a technical recession will be avoided.

  • This is 0.5 (0.6pp EU) stronger than the Autumn forecast.
  • Inflation projections for 2023 and 2024 were lowered slightly. Energy, goods and food prices are anticipated to slow and services inflation will ease only gradually due to wage growth.
  • Successful diversification of gas supply alongside a marked reduction in consumption has contributed to high gas storage levels and wholesale gas prices have eased.
  • Inflation risks are largely energy-related, whilst risks to growth are balanced. High energy costs, rising core inflation and tightening financial conditions may prove a more pronounced drag on demand. China's reopening in particular could boost external demand, but also global inflation.
  • Note: the forecast implements the assumption that the Russia-Ukraine war does not escalate.

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