Third-quarter contraction underscores a troubling year for the 20-nation single currency zone.
The eurozone stands on precarious ground as recent data reveals a 0.1% economic contraction in the third quarter of 2023. This decline surpasses previous forecasts and marks the third stagnation in four quarters. Remarkably, the economy now registers a mere 0.1% growth compared to last year.
Notably, this downturn occurs despite a notable dip in the eurozone’s annual inflation rate, which dropped from 4.3% in September to 2.9% in October. Recession typically follows two consecutive quarters of declining gross domestic product (GDP).
Factors contributing to the eurozone’s economic stagnation include the European Central Bank’s heightened interest rates, inflation’s adverse effects on consumer spending, and a decline in exports due to a globally decelerating economy.
On a broader scale, the EU economy reported a modest 0.1% growth in the third quarter, mirroring its performance from the same period last year. Diving deeper, Germany’s economy shrunk by 0.1%, while France and Spain reported growths of 0.1% and 0.3% respectively.
Italy’s economy remained static. Ireland, however, faced a severe contraction at -1.8%. Contrarily, Latvia and Belgium observed robust growths at 0.6% and 0.5%, respectively.
Bert Colijn, a seasoned economist at ING bank, opined, “Given the decline in eurozone GDP, a minor technical recession in the latter half of 2023 seems plausible.”
While the European Central Bank’s stance may shift towards a softer approach due to the rapid decline in inflation, Colijn remains skeptical about any imminent rate cuts.
Jack Allen-Reynolds, deputy chief economist at Capital Economics, reinforced the grim outlook, stating, “The eurozone’s contraction in the third quarter, coupled with the frailty of surveys entering the fourth, foretells a bleak economic future.”
<a href="https://www.theguardian.com/business/2023/oct/31/eurozone-economy-shrinks-recession-ireland-austria-germany-france#:~:text=Eurozone%20economy%20shrinks%20by%200.1%25%2C%20putting%20it%20at%20brink%20of%20recession,-Ireland%20and%20Austria&amp;text=The%20eurozone%20is%20teetering%20on,the%20third%20quarter%20of%202023." rel="noopener noreferrer nofollow" target="_blank">Experts</a> project the European Central Bank, which has already increased interest rates by 4.5 percentage points since summer 2022, will maintain the current borrowing costs despite the plummeting eurozone inflation rate.

Eurozone GDP contracts 0.1% in Q3, raising recession fears

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