Eurozone economy unlikely to exceed 0.6% growth this year

Factories in the Eurozone have had a dismal year, with manufacturing activity shrinking for the 18th consecutive month - recorded in December 2023.

Eurozone economy faces many difficulties.. (Source: Alamy)

The S&P Global Eurozone manufacturing purchasing managers' index (PMI) rose to 44.4 in December from 44.2 in November, but remained far from the 50 level that separates growth from contraction in manufacturing activity.

Mr. Cyrus de la Rubia, chief economist of Hamburg Commercial Bank, commented that this weakening trend is a sign that the Gross Domestic Product (GDP) of the Eurozone may have decreased in the last quarter.

"According to official figures, the Eurozone economy shrank by 0.1% in the third quarter. A second consecutive quarterly contraction would mean the region's economy fell into recession," he said.

The Financial Times, which conducted a survey of 48 economists, said the regional economy is expected to have only a moderate economic growth of 0.6% in 2024.

Experts say the Eurozone economy will not be able to exceed 0.6% growth, despite the fact that wages are expected to rise faster than inflation.

Two-thirds of respondents said they saw the eurozone economy falling into recession – usually defined as a decline in GDP for two consecutive quarters.

Wage growth in the eurozone is expected to reach just 4% in 2024, while consumer prices are forecast to rise by an average of just over 2.5% next year and a little under 2.1% in 2025, according to economists.

The outlooks issued by the European Central Bank (ECB) and the International Monetary Fund (IMF) are more optimistic, as analysts from these institutions expect the bloc's economy to grow by 0.8% and 1.2% respectively in 2024.

Earlier, a December survey by Reuters news agency showed that the Eurozone would experience a mild and short recession in the winter.

The new orders sub-index rose to 42 in December from 41.5 in November, but remained below the 50 threshold. The index is also in contraction territory for the full year of 2023.

In addition, the inventory sub-index showed that manufacturing activity in December focused mainly on completing old orders.

This suggests that manufacturers do not expect manufacturing activity to recover soon. Factories cut staff for the seventh consecutive month in December.

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