On September 11, 2023, the European Commission revised its economic growth expectations for the year, anticipating a slowdown in growth compared to its previous

projections. European Economic Affairs Commissioner Paolo Gentiloni made this announcement on Monday.

During the spring, the Commission had initially predicted a 1 percent growth rate for 2023. However, they have now revised this estimate downward to 0.8 percent. The most notable factor affecting this adjustment is the German economy, where the Commission foresees an impending recession this year. Their new projection indicates a contraction of 0.4 percent in the German economy, a significant shift from the previously expected minimal growth of 0.2 percent. In addition, the Netherlands is expected to experience modest growth of just 0.5 percent, down from the earlier estimate of 1.8 percent. Meanwhile, Spain and France are still projected to achieve growth rates above one percent, specifically at 1.9 percent and 1.2 percent, respectively.

The Commission's updated outlook primarily focuses on six major countries: Germany, Spain, France, Italy, the Netherlands, and Poland. European Economic Affairs Commissioner Paolo Gentiloni stated, "We have selected the largest economies, but in the autumn forecast, we will delve into the economies of all 27 EU member states."

The European Commission attributes the slowdown in European economic growth to elevated inflation, prompting the European Central Bank to raise interest rates as a measure to counteract inflationary pressures. The Commission noted that high prices are taking a more substantial toll than anticipated, and the increased interest rates are creating challenges for businesses in obtaining loans. Despite these factors, the labor market remains resilient, with exceptionally low unemployment rates and rising wages. Consequently, the Commission anticipates a "moderate pickup" in growth for the following year.

Commissioner Gentiloni commented, "Economic activity decelerated in the second quarter and is expected to continue this trend in the upcoming quarters." In the eurozone, growth is now projected at 0.8 percent, a downgrade from the previous estimate of 1.1 percent. For the year 2024, the Commission anticipates growth of 1.4 percent for the entire EU, compared to the previous forecast of 1.7 percent in the spring. Within the euro area, the forecast indicates growth of 1.3 percent, down from the previous estimate of 1.6 percent.

Although inflation is expected to decline, it remains at elevated levels. For instance, the projected inflation rate for this year is 6.5 percent, slightly lower than the 6.7 percent forecasted in the spring. Looking ahead to 2024, the Commission foresees an inflation rate of 3.2 percent for the European Union as a whole. In the euro area, inflation is expected to reach 5.6 percent in the current year and decrease to 2.9 percent in 2024, putting the European Central Bank's target of returning to a 2 percent inflation rate well within reach.