European economies may contract in 2023 due to the energy crisis and inflation
According to a Financial Times survey of economists, the euro area economy is expected to contract. European economies are poised to contract next year as high inflation and energy shortages reduce output. Unemployment is also expected to rise.
Of the 37 economists polled by the FT, 90 percent said they thought the eurozone was already in recession. Economists have predicted that the gross domestic product will shrink over the next year.
Economists predict the euro zone economy will contract 0.01 percent next year. This rate is more pessimistic than the forecasts of the European Central Bank (ECB), which predicts that the Eurozone will grow by 0.5 percent next year.
‘INFLATION WILL CONTINUE’
According to economists, inflation in the euro zone is expected to remain above the ECB’s 2 percent target for at least two more years. Economists predict prices will rise just over 6 percent next year, with inflation rising to 2.7 percent in 2024. Eurozone inflation was 10.1 percent a year in November.
Economists also predict unemployment will rise to 7.1 percent next year, from a record low of 6.5 percent in October.
‘THE ENERGY CRISIS CAN BE DEEP’
Economists surveyed also stated that the energy crisis is likely to deepen. Although most economists say the energy crisis that erupted with the Russia-Ukraine war is past its worst, a possible tension or cold winter crisis could unleash it again.
“Gas markets in Europe remain at risk,” said Chiara Zangarelli, an economist at Morgan Stanley. “Additional cuts or a cold winter could lead to new tensions and a resurgence in prices,” she said.
Sylvain Broyer, chief economist for Europe, Middle East and Africa at S&P Global Ratings, said: “The risk of gassing with the scorecard is likely to go away this winter. But there is still the possibility of a power supply problem for the next winter, ”he said.
‘HOUSING PRICES WILL DECREASE’
In addition to the energy crisis, the problems created by inflation and high interest rates in Europe are also expected to have a negative impact on the economy. The ECB had raised interest rates by 2.5 percentage points throughout 2022. The bank is expected to further increase its borrowing costs in 2023.
High interest rates are also expected to affect the housing market. The downturn in the economy, coupled with rising mortgage costs across Europe, predicts a sharp decline in the region’s real estate market.
Economists expect eurozone house prices to fall 4.7 percent next year. “Home prices won’t continue to rise if we’re in a recession and interest rates go up,” said Maria Demertzis, a senior fellow at the Bruegel think tank.