BRUSSELS: The eurozone economy narrowly avoided a technical recession in the second half of 2023 but stagnated in the final three months of the year, official data showed Tuesday.
The single-currency area’s economy has been hit by many factors including higher interest rates, a cost-of-living crisis battering household spending and weakening global demand.
The stagnation was driven by the dismal performance of the continent’s powerhouse Germany, although southern European states helped the area avoid recession.
The zero-percent quarter-on-quarter figure for the October-to-December period beat forecasts.
Analysts for Bloomberg and financial data firm FactSet had predicted a contraction of 0.1 percent in the fourth quarter.
If the predictions had been correct, that would have meant two consecutive quarters of contraction — the threshold for a technical recession.
The EU’s Eurostat data agency also recorded no growth in the 27-country bloc — which includes members that do not use the euro — over the October-December period after a contraction of 0.1 percent in the third quarter.
Economists predict the economic stagnation will continue.
“We think that it will flatline in the first half of this year too as the effects of past monetary tightening continue to feed through and fiscal policy becomes more restrictive,” said Jack Allen-Reynolds of Capital Economics, an economic research firm.
He added that the eurozone dodging a technical recession was “just semantics”.
“The big picture is that eurozone GDP has been flat since Q3 2022 when gas prices surged and the ECB (European Central Bank) started raising interest rates,” he said.
Energy prices soared after Moscow’s invasion of Ukraine and as Europe scrambled to shift to different energy sources after relying on Russia for many years.
Germany’s lacklustre performance comes as its critical manufacturing sector reels from soaring power costs, with the situation compounded by slowing demand from key export destinations, such as China.
The German economy shrank 0.3 percent in the final quarter of 2023, Eurostat said.
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