Eurozone Economic Forecast

Eurozone Economic Outlook

December 23, 2021

The economy grew solidly in Q3, mainly as easing restrictions propelled household spending. However, the recovery has likely slowed in Q4 amid soaring inflation and the reinstatement of restrictions in several countries due to rising Covid-19 infections. PMI readings indicate softer expansions in the manufacturing and services sectors in the quarter. Meanwhile, business confidence remained upbeat in October–November but consumer sentiment weakened in the same two months, suggesting consumers slowed their shopping activity. However, industrial production rebounded strongly in October, mainly driven by the German locomotive industry. In other news, the ECB has recently signaled risks of excessive asset and housing price inflation, while gas prices have surged after Germany stopped the Nord Stream 2 pipeline. In politics, Germany’s traffic light government has taken power, while Austria has named a new chancellor.

Eurozone Economic Growth

GDP growth should moderate in 2022, although it will remain robust. Spending of accumulated savings and EU recovery funds amid loose fiscal and monetary policies will provide temporary stimulus. That said, protracted supply constraints, renewed restrictions, elevated energy prices, troubled fiscal metrics and banks’ NPLs pose downside risks. The economy is seen expanding 4.2% in 2022, which is down 0.1 percentage points from last month’s forecast. In 2023, GDP is seen increasing 2.4%.

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Eurozone Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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