Officials forecast economy to expand 0.9 per cent this year
The new projections will be closely watched by Europe’s governments as they try to wean households and businesses off massive aid to tackle the energy crisis and shift to more targeted support. They will also provide insight to central bankers, who have embarked on a series of rate hikes in an effort to bring soaring inflation back under control.
Germany, the region’s biggest economy, and Austria are the only two euro-area countries seen having two consecutive quarters of contraction in the six months through March 31. Estonia’s output decreased in the last three quarters of 2022 but is seen growing in the current period. Outside the euro zone, the Czech Republic and Hungary have already ended two quarters of contraction, while Denmark and Sweden are currently in recession.
“Consumers and businesses continue to face high energy costs, and core inflation — headline inflation excluding energy and unprocessed food — was still rising in January, further eroding households’ purchasing power,” it said. “As inflationary pressures persist, monetary tightening is set to continue, weighing on business activity and exerting a drag on investment.”
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