Eurozone in recession at start of 2023

The eurozone entered into a technical recession at the start of the year, shrinking by 0.1 per cent for a second consecutive quarter, figures from the EU’s statistic agency showed Thursday.

Eurostat revised down an earlier forecast that had predicted slight growth, after economic powerhouse Germany said last month it had fallen into recession.

The worse-than-expected figures come as inflation and higher interest rates have curbed demand in Europe’s largest economy.

Eurostat slashed its earlier prediction of 0.1 per cent growth in the final quarter of 2022 and 0.2 per cent in the first quarter of 2023 to 0.1 per cent contractions in both periods. Two consecutive quarters of shrinking gross domestic product is the threshold for a technical recession.

The bad news comes after a painful year for European economies as surging energy prices sparked by Russia’s war on Ukraine sent inflation spiralling.

The European Central Bank has responded by hiking its key rates by 3.75 per centage points since embarking on an unprecedented campaign of monetary tightening in July last year.

The latest figures cast doubt over more optimistic predictions for the whole 2023.

The European Commission forecast in mid-May that growth for the year would reach 1.1 per cent across the 20 countries that use the single currency.

Charlotte de Montpellier, an economist at ING Bank, predicted that the figure for 2023 would only reach 0.5 per cent.

“Since the spring, all the data has been bad”, she told AFP, pointing in particular to German industrial production and new orders.