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Eurozone looks set to avoid winter recession

January 31, 2023

Economic output grew by 0.1% in the last quarter of 2022 compared with the previous quarter, according to an early estimate.

A worker at a steel plant with rolls of steel
The EU statistics agency says the single currency area's economy grew by 3.5% in 2022Image: Julian Stratenschulte/dpa/picture alliance

The eurozone economy looks set to avoid a recession this winter after output nudged up only slightly by 0.1% in the fourth quarter of 2022, according to a first estimate by the European Union's statistics agency Eurostat.

The preliminary data appears to show the single-currency area will avoid an outright downturn after a mild winter dispelled fears of energy rationing in Europe.

What's behind the figures?

While the figure is lower than the 0.3% growth recorded in the third quarter, it is better than some economic forecasts of a contraction.

Annual growth for 2022 is estimated to be 3.5% for the common currency area and 3.6% across the EU as a whole, seasonally adjusted quarterly data shows.

For Europe's biggest economy, Eurostat estimates that Germany's output shrank by 0.2% in the past quarter. That figure matches calculations published by the Federal Statistical Office on Monday.

However, the zone overall appears to have avoided the feared scenario of forced industrial shutdowns due to natural gas shortages after Russia halted most supplies. Warm weather and a scramble to source new supplies by ship instead of pipeline from Russia have caused that worst-case scenario to dissipate for the time being.

The strongest economic growth in the European Union in the past quarter was recorded in Ireland (+3.5%), Latvia (+0.3%), and both Spain and Portugal (each at +0.2%). The biggest slumps were in Lithuania (-1.7%), Austria (-0.7%) and Sweden (-0.6%).

Recession, war and climate high on Davos agenda

While the energy crisis could have been worse, natural gas prices are still three times higher than before Russia started massing troops on its border with Ukraine. They rose to a record high of 18 times that level in August, with prices hitting utility bills and forcing up the price of food and other goods.

Growth had also been hampered by reduced activity in China, previously a motor of global growth, because of severe COVID-19 restrictions that have since been lifted. 

The latest growth figures, while modest, at least raise the possibility that the eurozone will avoid a technical recession even if the first quarter of 2023 shows a decline. One of the definitions of recession is two successive quarters of negative growth.

The single currency area was made up of 19 countries up until the end of 2022, increasing to 20 after Croatia joined at the start of the year

rc/rt (AFP, dpa)