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    Home » EU forecasts steady growth, but warns against uncertainty

    EU forecasts steady growth, but warns against uncertainty

    eub2By eub218 November 2024Updated:19 November 2024 Finance No Comments2 Mins Read
    — Filed under: EU News
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    After a prolonged period of stagnation, the European economy is returning to modest growth, while the disinflation process continues, according to the EU’s autumn forecast.

    The European Commission’s Autumn Forecast is projecting GDP growth in 2024 at 0.9% in the EU and 0.8% in the euro area. Economic activity is forecast to accelerate to 1.5% in the EU and to 1.3% in the euro area in 2025, and to 1.8% in the EU and 1.6% in the euro area in 2026.

    Headline inflation in the euro area is set to more than halve in 2024, from 5.4% in 2023 to 2.4%, before easing more gradually to 2.1% in 2025 and 1.9% in 2026. In the EU, the disinflation process is projected to be even sharper in 2024, with headline inflation falling to 2.6%, from 6.4% in 2023, and to continue easing to 2.4% in 2025 and 2.0% in 2026.

    The report shows that a still high cost of living and increased uncertainty following repeated exposure to extreme shocks, compounded with financial incentives to save in a context of high interest rates, led households to save an increasing share of their income.

    Overall, domestic demand is projected to drive economic growth going forward. In 2025 and 2026, exports and imports are expected to grow at broadly the same pace, implying a neutral contribution to growth by net trade.

    The disinflationary process, which began end-2022, continues despite a slight pick-up in inflation in October, largely driven by energy prices.

    Price pressures in services remain high, but are projected to moderate as from early 2025, driven by slowing wage growth and an expected pick-up in productivity, and supported by negative base effects.

    The EU labour market held up well in the first half of 2024 and is expected to remain strong. Employment growth in the EU is set to continue, although at a slower pace, from 0.8% in 2024 (0.9% in the euro area) to 0.5% in 2026 (0.6% in the euro area).

    The report warns that uncertainty and downside risks to the outlook have increased. Russia’s protracted war of aggression against Ukraine and the intensified conflict in the Middle East fuel geopolitical risks and risks to energy security.

    A further increase in protectionist measures by trading partners could upend global trade, weighing on the EU’s highly open economy.

    Autumn 2024 Economic Forecast

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