Subscribe here: [ Ссылка ] Following a prolonged and broad-based stagnation, the EU economy resumed growth in the first quarter of this year. As projected in spring, the expansion continued at a subdued, yet steady, pace throughout the second and third quarters, amidst further abating inflationary pressures. The conditions for a mild acceleration of domestic demand appear in place, despite heightened uncertainty.
The EU’s economic outlook remains highly uncertain, with risks largely tilted to the downside. Russia’s protracted war of aggression against Ukraine and the intensified conflict in the Middle East fuel geopolitical risks and continued vulnerability of European energy security. A further increase in protectionist measures by trading partners could weigh on global trade, with negative impact on the EU's highly open economy. Low productivity growth may make it increasingly difficult for firms to sustain wage growth, leading them to either reduce labour or pass rising costs to consumers. Moreover, delays in the implementation of the RRF or a more restrictive fiscal stance in 2026 as the MTFSPs are implemented could further dampen economic activity. Finally, the recent floods in Spain illustrate once again the dramatic consequences that the increasing frequency and scope of natural hazards can have not only for the people affected and their habitat, but also for the economy.
This Autumn Forecast projects real GDP growth in 2024 at 0.9% in the EU and 0.8% in the euro area. For the EU, this is 0.1 pps. lower with respect to spring, while it is unchanged for the euro area. Growth in the EU is expected to pick up to 1.5% in 2025, as consumption is shifting up a gear and investment is set to rebound from the contraction of 2024. In 2026, economic activity is projected to expand by 1.8%, on the back of continued expansion of demand. Growth in the euro area is set to follow similar dynamics and attain 1.3% in 2025 and 1.6% in 2026. The disinflationary process that started towards end-2022 continued over the summer. Notwithstanding a slight pick-up in October, largely driven by energy prices, headline inflation in the euro area is set to more than halve in 2024, from 5.4% in 2023 to 2.4%, before easing more gradually to 2.1% in 2025 and 1.9% in 2026. In the EU, the disinflation process is set to be even sharper in 2024, with headline inflation falling to 2.6%, from 6.4% in 2023, and to continue easing to 2.4% in 2025 and 2.0% in 2026.
Household disposable income kept expanding at a healthy pace in the first half of the year, supported by expanding employment and continued recovery in real wages. By mid-year, the purchasing power of wages had recouped almost half of the loss caused by high inflation.
Households, however, appeared reluctant to consume their extra income. With high inflation still fresh in mind, purchasing power remaining below its mid-2022 peak and the opportunity to reap greater financial returns from high interest rates, households kept saving an increasing share of their income.
In the second quarter of 2024, the household saving rate stood at 14.8% - above expectations and more than 3 pps. above its pre-pandemic long-term average (see Box I.2.3). At the same time, investment disappointed, contracting by more than 2.5% in the first half of the year. More than half of the contraction was due to one-off transactions in intellectual property products. Net of this volatile component, the contraction was still deep and broad-based across asset categories. Elevated uncertainty is estimated to have weighed on consumption and especially investment (see Special Issue 3). A rebound in global goods trade and continued expansion of trade in services nudged exports of goods and services up by 0.5% in the first half of the year. Imports growth lagged considerably behind, and net external demand thus contributed positively to growth. Consumption is estimated to have gained strength in the third quarter, but investment to have further contracted.
Importantly, prices of both gas and electricity are expected to decline in 2026 from their 2025 levels.
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