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Shipyard workers in Wismar: Brussels is more sceptical about economic development

Photo: Jens Büttner / dpa

According to the European Commission's forecast, the European Union's economy will grow more slowly this year than recently expected. The authority expects growth of 0.8 percent for the EU and the eurozone, according to the estimate published in Brussels on Monday.

In the spring forecast presented in May, the Commission had assumed an increase of 1.0 percent (eurozone 1.1). Another reason for the worsening outlook is weak consumption in the first half of the year due to further rising consumer prices.

In Germany, the economy is estimated to shrink by 0.4 percent this year. In May, growth of 0.2 percent had been predicted for the EU's largest economy. For 2024, the authority now expects the German economy to grow by 1.1 percent (previously 1.4 percent).

Many leading German research institutes have also recently predicted a contraction in the largest economy in the currency area: The industrial location is suffering particularly from high energy costs and the weak global economic environment – especially due to China's economic weakness.

With regard to the consequences of the Ukraine war, rising interest rates and high inflation, EU Commissioner for Economic Affairs Paolo Gentiloni spoke of "multiple headwinds" that were slowing down growth more than expected in the spring.

Unemployment is very low

The Vice-President of the European Commission, Valdis Dombrovskis, expects a mild recovery next year after a period of weakness, "supported by a strong labour market, record low unemployment and easing price pressures".

Across the EU, the Commission also lowered its forecast for the coming year and now expects economic growth of 1.4 percent (previously 1.7 percent). The authority estimates the economic growth in the eurozone in 2024 at 1.3 percent (previously 1.6).

Inflation expectations in the eurozone have been revised downwards compared to the spring (5.8 percent) to 5.6 percent this year. For 2024, 2.9 percent (previously 2.8) is expected.

The ECB will decide on the key interest rate again on Thursday: After nine hikes in a row, the monetary watchdogs around ECB President Christine Lagarde are discussing whether the series will continue or take a break. The current key interest rate is now 3.75 percent. The updated in-house economic forecasts, which will be available at the meeting, are likely to provide an important decision-making aid for the monetary authorities.