The European Union (EU) has cut its economic growth forecast in the face of multiple domestic and foreign crises.
The latest Winter Economic Forecast by the unelected European Commission adjusted the outlook downwards to 0.9 percent this year from the expected 1.3 percent.
The Eurozone, the group of countries which use the euro currency, has seen similar downgrades, with economists now projecting a growth rate of 0.8 percent rather than 1.2 percent.
Concerns linger that the EU’s economy might encounter more obstacles than previously thought amid the Middle East conflicts and the cuts to national energy subsidies as part of the bloc's war on farmers, now protesting across mainland Europe.
Paolo Gentiloni, the European Commissioner for Economy said the past year had been “extremely challenging” marred by a “confluence of factors.”
But he was was hopeful that the EU would slowly make a comeback this year, driven by factors like gradual price increases, an uptick in real wages, and a robust labor market.
Although the 27-member union managed to avoid a continent-wide recession by the end of 2023, its economic growth has been lacklustre, and economic powerhouse Germany has fallen into negative growth.
Energy prices in Europe have soared since 2021 as a result of sanctions on Russia following the launch of its special military operation in Ukraine in February 2022.
"At the Trento Economics Forum [in May 2023], EU Commissioner Paolo Gentiloni said: 'If Germany does not grow, this is not good news for Europe. Italian manufacturing is closely linked to German manufacturing, and therefore, the situation in Germany can also affect Italy. This is the reality," Paolo Raffone, a strategic analyst and director of the CIPI Foundation in Brussels, told Sputnik.
Despite the European Central Bank's (ECB) interventions, inflation is forecast to keep rising in Germany and the EU. Inflationary pressure in Europe arises from not just surging energy prices but also from increased costs across non-energy sectors.
Europe continues to face challenges as its working-age population is projected to decline. Businesses are holding onto their employees, raising wages and potentially driving up wages while cutting productivity. Companies complain that red tape is hampering their competitiveness.
Eight of the Eurozone's 20 members fell into recession in the past year. Their prospects remain grim year, a growth rates remain restrained, especially in the bloc's three major economies — Germany, France, and Italy. Former EU member the UK also dipped into recession in the last quarter of 2023 as its gross domestic product (GDP) fell by 0.3 percent thanks to reduced consumer spending during the cost-of-living crisis.