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Economists predict a gloomy outlook for EU economic growth

2023-11-10 17:18:00, Ekonomi CNA

The former president of the European Central Bank, Mario Draghi, has given a negative picture regarding the economic growth of the European Union, predicting a recession by the end of this year, while he has warned that the long-term survival of the European project depends on urgent political integration.

"It is almost certain that we will have a recession by the end of the year," he told the FT Global Board conference.

"It's pretty clear that the first two quarters of next year will show that."

The former Italian prime minister said the recession was unlikely to be "deep" or "destabilising", but his assessment was weaker than recent forecasts from the ECB or the IMF, both of which expect a return to European growth from the last months of this year.

Draghi's warning comes as the EU economy struggles to recover from back-to-back crises caused by the coronavirus pandemic and Russia's ongoing war against Ukraine, which exposed weaknesses in the bloc's supply chains, energy market and dependencies. global.

"Or Europe acts together and becomes a stronger union, a union capable of expressing a foreign policy and a defense policy, in addition to all economic policies. . . or I fear that the European Union will not survive unless it is a single market", added Draghi.

Draghi has been tasked by the European Commission to prepare a report on how the EU can handle its global competitiveness, especially compared to the US and China, which have invested heavily in supporting the green transition of their economies.

"We should be very concerned about this. The European economy has lost competitiveness in the last 20 years, not only to the United States, but to Japan, South Korea and, of course, China," said Draghi.

That came, he said, as the bloc's past model of relying heavily on the United States for defense, China for trade and Russia for energy has ended.

"The geopolitical, economic model on which Europe relied since the end of the Second World War has disappeared."

He singled out Europe's low productivity, high energy costs and lack of skilled labor as weaknesses.

"To have an economy capable of supporting an aging society at the pace we have in Europe, we must have much higher productivity. Where we need to come together is energy. We're not going anywhere by paying two or three times more for energy than it costs in the rest of the world.”

The eurozone economy shrank 0.1 percent in the third quarter compared to the previous quarter, according to preliminary estimates released by Eurostat, and many economists expect a further contraction in the fourth quarter.

However, the ECB's latest forecast for the eurozone is for a return to economic growth of 0.1 percent in the last quarter of this year, 0.3 percent in the first quarter of 2024 and then a period of growth of 0.4 per cent. cent.

Draghi said the impact of the expected recession on the European economy is likely to be softened by the relatively low unemployment rate, which rose slightly in September after hitting a record low of 6.4 percent earlier this year. Financial Times