BRUSSELS (Reuters) – The European Commission (EC) raised its growth forecast for 2023 on Monday and forecast a sharper slowdown in inflation towards the end of the year.

In its winter forecast, the EU executive said economic growth in the euro zone is expected to reach 0.9% in 2023, which represents a sharp revision from the 0.3% rate forecast in November.

The eurozone will narrowly avoid the technical recession that the Commission was still forecasting three months ago, with growth in the last three months of 2022 standing at 0.1% quarter-on-quarter and Brussels expecting a GDP stagnation over the January-March period.

The Commission said the uncertainty surrounding the forecast was high but the risks to growth were broadly balanced.

“Domestic demand could turn out to be stronger than expected if recent gas price declines feed through to consumer prices more strongly and consumption proves stronger,” she said, adding that a rise in prices could not be ruled out in the current geopolitical context.

Thanks to the reopening of China, external demand could also prove to be more dynamic, which could however fuel global inflation.

Inflation in the eurozone, which hit a record high of 10.6% in October, is expected to decline to 5.6% in 2023 and 2.5% in 2024.

The Commission had previously forecast a price increase of 6.1% for this year and 2.6% for next year.

“This forecast is essentially based on the purely technical assumption that Russian aggression against Ukraine will not escalate but will continue throughout the forecast horizon,” she added.

(Jan Strupczewski, Laetitia Volga, edited by Blandine Hénault)

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