The Eurozone and the EU as a whole are likely to be able to avoid a recession this winter. The eurozone economy did not contract in the fourth quarter of 2022, contrary to forecasts, and is expected to grow by 0.9 percent for the current year, the European Commission (EC) said Monday, February 13. Inflation in the Eurozone is expected to be 5.6 percent (5.9 percent was forecast).

Back in the fall of 2022, the European Commission was forecasting a very gloomy picture, especially for Germany. For the EU as a whole, the EC expected growth in 2023 to be only 0.3 percent, and for Germany a GDP contraction of 0.6 percent was projected. Favorable trends since the fall forecast have improved the outlook for economic growth this year, the European Commission said.

For the EU as a whole, the European Commission now forecast economic growth of 0.8 percent, Germany's GDP growth will be 0.2 percent. Only Sweden's economy is expected to contract by 0.8 percent.

The European Commission attributes the more favorable forecasts to the diversification of natural gas supplies and the strong decline in energy consumption. As a result, natural gas storage facilities remain well stocked and wholesale gas prices have fallen to levels that existed before Russia's war against Ukraine began.

The European Commission also attributes lower inflation forecasts for the euro area to these factors. Core inflation (excluding food and energy prices) has not yet reached its peak, but companies are becoming more optimistic again, the regulator said.