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Eurozone set to avoid recession.

The likelihood that the eurozone will fall into a deep recession this winter is receding, according to economists, who have scaled back their projections. More incredible fiscal support from governments, lower gas prices, and a mild autumn have helped improve the bloc's outlook. However, most forecasters expect eurozone output to contract in the coming quarters. The European Commission said this month that it expected the economy to shrink by 0.5 per cent in the fourth quarter and by 0.1 per cent in the first quarter of next year. "Recession in the eurozone is not likely to be as deep as had been feared," said Susannah Streeter of asset manager Hargreaves Lansdown.

Success in filling gas storage facilities to total capacity has also eased concerns that the industry would face periods without power. Goldman Sachs this week changed its prognosis for the same period, expecting a contraction of 0.7 per cent from a previous forecast of a 1 per cent fall in output. Lower gas prices, reduced risk of energy rationing and extra financial support from governments pointed to "a shallower recession", said Sven Jari Stehn, the bank's chief European economist. Eurozone output expanded 0.7 per cent in the second quarter of this year and 0.2 per cent in the third.

The resilience so far meant there would be more "carry over" of economic activity into this winter, said Silvia Ardagna, chief European economist at Barclays. However, economists are increasingly gloomy about the outlook for next winter and now believe eurozone output will shrink 0.1 per cent in 2023, a sharp downgrade from the 2.3 per cent expansion expected in March, shortly after Russia invaded Ukraine. The fear is that with Russian gas supplies set to remain limited, it will be harder to refill Europe's storage capacity for next winter. 

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  1. Byron21 November 2022 at 18:42

    If the Russian Ukraine war continues things will get worse. It will be very hard to refill Europe's storage capacity for next winter and we will probably see many people not being able to warm their homes next year. It's a real possibility with no end in sight for this war. Not sure the Eurozone will indeed avoid recession. I think not.

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