The European Commission boosted its 2023 economic growth outlook for the eurozone on Monday but it also raised the inflation forecast for the single currency area.
The EU executive's spring forecast is more optimistic than that issued late last year, despite inflation proving "stickier than expected" in its decline from record levels.
The commission raised its growth outlook by 0.2 points to 1.1 per cent.
"The European economy is in better shape than we projected last autumn," the EU commissioner for the economy, Paolo Gentiloni, said in the statement.
"Thanks to determined efforts to strengthen our energy security, a remarkably resilient labour market and easing supply constraints, we avoided a winter recession and are set for moderate growth this year and next."
Brussels also raised the 2024 growth forecast for the 20-country single currency zone by 0.1 points to 1.6 per cent.
The growth forecast for the 27-nation EU as a whole was also raised for 2023, though it remains lower than the eurozone at around one per cent.
The eurozone inflation forecast has also been revised higher, forecast to hit 5.8 per cent in 2023 compared to 5.6 per cent in the previous outlook.
Consumer prices are expected to drop back to 2.8 per cent in 2024, still above the ECB's two per cent target.
"As inflation remains high, financing conditions are set to tighten further," the statement warned.
"Though the ECB and other EU central banks are expected to be nearing the end of the interest rate hiking cycle, the recent turbulence in the financial sector is likely to add pressure to the cost and ease of accessing credit, slowing down investment growth and hitting in particular residential investment."
