EC keeps Eurozone annual growth forecast for 2024 stable at 0.8%, while confirming 0.4% rebound in 1Q24

European fiscal stimuli 1

Bankinter: European Commission forecasts point to a soft landing for the economy.- GDP: +0.8% versus +0.8% previously in 2024 and +1.4% versus +1.5% previously in 2025. CPI: +2.5% versus +2.7% previously and +2.1% versus +2.2% previously respectively.

Analysis: After the downward revision of growth for the Eurozone in the February report, the EC maintains its forecast for 2024 and revises the estimate for 2025 downwards very slightly. The institution continues to point to a weak economy, gaining traction in 2025. On the inflation side, the revision is downward in both periods, with the European Commission estimating that the price level is close to the 2% target in 2025. In fact, the scenario drawn by the EC is one of a soft landing for the economy. However, some domestic and external risks are identified in the document. On the domestic side, the EU’s executive body refers to monetary policy, debt and deficits in member countries (it estimates deficits of -3.0% and -2.8% in 2024 and 2025), savings dynamics and the climate emergency as the main barriers. On the external front, geopolitical tensions and US monetary policy emerge as the main sources of uncertainty.

On the other hand, the first revision of the Eurozone’s Q1 2024 GDP confirms the acceleration of the economic cycle registered in the preliminary reading – GDP Q1 2024 (1st revision): +0.4% year-on-year versus +0.4% preliminary and +0.1% in Q4 2023.

Assessment: Good data for the economy and the market. But with limited impact, as it only confirms the figure known in the preliminary reading. The economy gains traction in the first quarter of the year and gives another sign of the change for the better in European macro data. The market now awaits the next ECB meeting (6 June), where the central bank is expected to implement the first rate cut.

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