The European Commission unveiled a more positive outlook for the European Union’s economy on Monday with growth expected to reach 1.1% in the eurozone and 1% in the 27-member bloc for 2023.

The economy’s “better-than-expected start” to the year comes after a decrease in energy prices, improved supply conditions and with the support of high employment, a commission statement said.

A previous commission forecast in February predicted growth of 0.9% in the eurozone and 0.8% growth in the EU as a whole, however the commission still warned of significant challenges.

The EU executive arm revised inflation expectations up to 5.8% in the eurozone, up from 5.6% in a previous forecast. Borrowing conditions also remain tight as interest rates are hiked to tackle inflation.

With current inflationary conditions, the commission noted the potential to reduce public debt levels in the EU in the short term.

However, linked to inflation, higher debt repayment costs and increases in public expenditure due to raised prices could impact EU member states ability to keep public debt levels sustainable.

Inflation could also weigh on consumer spending as wage growth lags behind, the commission said.

For 2024, economic growth is forecast to reach 1.6% in the eurozone and 1.1% in the EU.

Source: Oman News Agency