The news about an unexpected economic upturn in Europe has captured top headlines. According to media reports, the economy of the region has staved off the threat of a recession. However, it looks more like the last spurt before a dramatical collapse.
Data from Eurostat showed that the European economy was marked by surprise expansion in the last quarter of 2022. Gross domestic product increased by 0.1% compared to the previous quarter, while economists had pointed to a 0.1% contraction over the same period. Thus, neither the energy crisis nor rising food prices have inflicted a major setback in Europe’s economy. In addition, energy costs in the region have declined since the second half of last year, thus boosting economic activity.
According to Eurostat, Ireland (3.5%), Spain (0.2%), and France (0.1%) eked out the highest increase in GDP. Sweden (-0.6%), the Czech Republic (-0.3%), and Germany (-0.2%) were among the worst performers. Some analysts believe that Germany may head into a recession. “Germany has likely entered a shallow and short recession in the fourth quarter that will last through the first quarter before the economy stabilizes in the second quarter (of this year),” Berenberg economist Salomon Fiedler said.
