Is Europe's Economic Recovery At Risk? Predictions Indicate First Recession Since Pandemic

In a surprising turn of events, the Euro Zone is predicted to face its first recession since the global pandemic, with economists forecasting a contraction in the economy for the second quarter in a row, as per a recent Bloomberg survey.

What Happened: A Bloomberg report on Dec. 11, 2023, revealed that the Euro Zone’s economy is projected to shrink by 0.1% between September and December, a stark departure from earlier expectations of unchanged output. An economic rebound is foreseen to begin in early 2024, although this is subject to considerable uncertainty.

Joerg Angele, an economist at Bantleon Bank, cast doubt on the likelihood of an economic recovery, pointing to “strong headwinds,” notably a significant increase in interest rates.

The economic downturn is primarily driven by Germany, Europe’s biggest economy. The German economy is anticipated to shrink by 0.2% in the fourth quarter, exceeding previous predictions of a 0.1% contraction. This is largely due to a budget crisis and sluggish global demand.

See Also: JPMorgan Strategist Reveals 99% Of US Consumers To Face Worse Financial Crunch Than Pre-Pandemic Levels

This forecast stands in contrast to the European Commission's November prediction, which expected the 20-nation euro area to return to growth this quarter, propelled by falling inflation and a strong job market.

Interestingly, despite a slowdown in consumer-price growth, economists have revised their inflation predictions through September 2024, with speculations of the European Central Bank slashing rates as early as spring.

Why It Matters: The recession forecast aligns with the forecast from April 2023, where Bank of America analysts reiterated a notably bearish stance on European equities, predicting a 20% decline by year-end amid a deteriorating macro outlook.

Moreover, this isn’t the first time recession alarms have been raised for the Euro Zone. Back in 2019,  experts anticipated a eurozone recession was imminent due to various troubling factors.

These predictions underscore the precarious state of the European economy amid global economic turbulence.

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