Eurozone: GDP, Inflation and Government Support

The IMF in April revised upward its estimate of Eurozone GDP growth for 2023 to 0.8%, from its estimate of 0.7% in its January 2022 report.

It highlights the heterogeneity among countries in the region. For example, for Spain the estimated real annual growth is 1.5% and for Germany -0.1%.

On the other hand, for the United Kingdom a fall of 0.3% is anticipated, with a certain probability of entering recession.

For 2024, the IMF expects GDP growth for the euro area of 1.4% and 1% for the UK.

In 2022, economic activity in the euro zone surprised on the upside with real GDP growth of 3.5%, despite the slowdown in the second half of the year due to the impact of the war in Ukraine and the sanctions imposed on Russia.

According to Mexico’s SHCP, the resilience of economic activity was explained by a warmer winter than anticipated, which allowed natural gas inventories to be replenished and contributed to reducing pressure on energy prices.

In addition, non-energy intensive industrial production (i.e. vehicles, machinery and equipment) grew more than expected as disruptions in global value chains normalized, while generous fiscal support to businesses and households mitigated the impact of high electricity and natural gas prices.


Eurozone headline inflation declined from a peak of 10.6% y/y in October 2022 to an annual rate of 8.5% in February 2023, mainly due to falling energy prices.

On the other hand, core inflation was more persistent with a rate that increased from 5.0% to 5.6% in the same period, due to higher wage costs in the services sector and higher demand for physical contact-intensive services.

Between September 2021 and January 2023, the European Union granted a total of €646 billion in government support, of which 41% came from Germany (7.4% of its GDP), followed by Italy (5.2% of its GDP) and France (3.7% of its GDP).

Support measures include housing subsidies, tax breaks for households and energy-intensive companies, transfers to households, as well as the nationalization of energy companies.

Although growth expectations anticipate that in 2023 the pace of economic growth in the Euro zone will slow as a result of the tightening of the European Central Bank’s (ECB) monetary policy, leading indicators predict that economic activity will remain resilient due to government policies to limit electricity prices and lower energy prices.

In this sense, in the first quarter of 2023 the composite PMI was in expansionary territory, after a second half of the year in contraction during 2022, supported mainly by the services sector.


Redacción Opportimes