The outlook for European economic growth is no longer as rosy as economists previously claimed. Eurozone GDP and output figures have been revised down.
Thus, the European Central Bank has downgraded its 2024 economic forecast for the euro area by 0.2 percentage points compared to its prior projection. Now the updated outlook foresees real GDP growth in the region to average 0.6% in 2024, down from 0.8% in the previous estimate.
However, the outlook for the next two years remains unchanged. ECB staff expect the eurozone economy to pick up by 1.5% and 1.6% in 2025 and 2026 respectively.
The update has also affected inflation. The central bank appears to have highly appreciated its monetary policy, thus lowering inflation forecast readings. ECB officials now project inflation to come in at 2.3% in 2024, down from 2.7% in the prior forecast. Looking ahead, inflation is expected to average 2% in 2024 instead of the previously estimated 2.1%, followed by 1.9% in 2026.
Topping it all off, the ECB has left its key interest rate unchanged at 4.5%.
Notably, euro area annual inflation eased to 2.6% in February, according to the latest figures from Eurostat.
So, in anticipation of future triumphs, the European economy is growing at a modest but steady pace. Although the revised GDP growth numbers suggest that the region’s economic activity will remain lackluster this year, they offer a more realistic perspective than before.
