Slower growth comes on the back of households counting the pennies as they are confronted with higher borrowing rates and decreasing state help to cover energy costs, which shot up after Russia invaded Ukraine two years ago.
“After a bruising 2023, the European economy has emerged a little weaker than expected, although the rebound should speed up gradually this year and into 2025,” Commission Executive Vice President Valdis Dombrovskis said in a statement.
The Commission did its best to put a positive spin on the data. Eurozone growth will begin to “stabilize” in the second half of this year and increase by 1.5 percent in 2025, the forecast said.
Inflation, meanwhile, is set to slow faster than expected despite ongoing tensions in the Red Sea. By the end of 2025, inflation should fall to 2.2 percent from 2.7 percent this year, just above the European Central Bank’s 2 percent target.
The Commission acknowledged that its positivity is still vulnerable to geopolitical risks. The conflict in the Middle East could worsen and the cost of shipping would increase if the Red Sea becomes even more dangerous for cargo ships to sail through.
“Geopolitical tensions, an ever more unstable climate, and a number of crucial elections around the world this year are all factors increasing the uncertainty around this outlook,” Economy Commissioner Paolo Gentiloni said.
