Eurozone Economic Forecast

Eurozone Economic Outlook

May 31, 2022

Momentum remained subdued in the first quarter. Industrial production was weak in the period, weighed down by soaring commodity prices and supply constraints. The services sector suffered from surging inflation and souring consumer sentiment. More positively, the unemployment rate continued to fall throughout the quarter amid easing Covid-19 restrictions, pointing to healthy labor market dynamics. Moving to Q2, robust PMI readings in April-May suggest solid activity, but pessimistic consumer sentiment and elevated inflation could be hitting household spending. Meanwhile, in late May, the European Commission extended the suspension of budgetary rules for member states until 2023. However, it also warned several countries against public accounts imbalances, and recommended fiscal prudence given heightened economic uncertainty. Lastly, a new taskforce was created to speed up energy diversification away from Russia.

Eurozone Economic Growth

Growth will cool this year, restrained by high commodity prices, protracted supply chain disruptions and downbeat confidence amid the war in Ukraine. That said, a healthy labor market, the disbursement of EU funds and the reopening of economies should sustain activity. Tighter financial conditions, elevated public debts and the duration of the war pose risks. The economy is seen expanding 2.6% in 2022, which is down 0.2 percentage points from last month’s forecast. In 2023, GDP is seen increasing 2.1%.

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Eurozone Facts

Value Change Date
Exchange Rate1.120.65 %Dec 31

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