The International Monetary Fund is now counting on growth of 0.5 % in 2023 in the euro zone, against the backdrop of the energy crisis. A complex situation to manage for central governments and banks.
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Galloping inflation and weak growth on the background of an energy crisis and uncertainty linked to war in Ukraine: this is the economic scenario that awaits Europe in 2023, and it is undoubtedly one of the worst possible. “The European perspectives have darkened considerably,” warns the International Monetary Fund (IMF) in its new economic forecasts for the Old Continent, published on Sunday October 23.
“The slowdown in growth is generalized, and more than half of the countries in the euro zone will experience a technical recession”, that is to say a decline in gross domestic product (GDP) in two consecutive quarters , adds Alfred Kammer, director of the Europe department of the IMF. In fact, the euro zone should grow 3.1 % in 2022, still carried by the post-Cavid catch-up in the first half, but only 0.5 % in 2023, provides for the institution. In April, the IMF was still tabling on 2.3 % for 2023.
In detail, Germany ( – 0.3 %) and Italy ( – 0.2 %) should record a recession in 2023, more affected by the energy crisis than France (0.7 %) or Spain (1.2 %). The region that the Washington institution designates as emerging Europe – mainly Central Europe, East and South – should grow (outside the country affected by the conflict: Ukraine, Belarus and Russia) 4.3 % this year and 1.7 % in 2023, compared to 2.8 % scheduled for April.
Ukraine, it should see its GDP contract by 35 % in 2022. IMF economists are careful for 2023 concerning kyiv, because no one knows how far human and material destruction will extend caused by Russian aggression. “The risks will be exceptionally high during the winter of 2022-2023,” they also warn, citing a possible climbing of war, the risk of an increase in tensions in Asia likely to disturb the channels of a little more ‘Supply, the nuclear threat, or the complete closure of the remaining Russian gas flows.
Cumulated to a rigorous winter, it could cause shortages, rations, and cost up to 3 % additional GDP in the most exposed countries, in particular those landed by central and eastern Europe. “Energy security will also be a problem by 2024 because it could be particularly difficult to fill out gas stocks in 2023,” adds Alfred Kammer.
Unsurprisingly, inflation, triggered by the energy crisis – but not only – is a major problem for the entire continent. On average, energy and food prices explain 70 % of inflation accumulated until August in the euro zone, and 60 % in emerging Europe. The strong depreciation of European currencies, whose euro, against the dollar has also played. If the outbreak of the price index should be 8.3 % in 2022 and 5.7 % in 2023 in the euro zone, the Baltic countries were particularly affected (17.6 % in Lithuania in 2022). Just like the Balkans, where it will be more than 10 % in 2022 almost everywhere.
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