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Eurozone economic growth stay below one percent this year. It will accelerate in 2025 thank to household consumption

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Apme Fx | Eurozone economic growth stay below one percent this year. It will accelerate in 2025 thank to household consumption

The Eurozone economy is only slowly looking for a way to faster growth. The gross domestic product of euro-area countries should increase by just under one percent this year. At the same time, economic growth relies primarily on robust household consumption, which should accelerate its rise next year. Investments will also help, inflation should stay close to two percent this year and next.[1]

In May, the European Commission issued a forecast for the economic growth of the Eurozone and the European Union as a whole. Although its update will not be published until mid-November, it seems that it will not change dramatically from spring.

In May, the European Commission expected Eurozone GDP to grow by 0.8 percent in 2024. A similar estimate was presented in August, for example, by the Czech National Bank, which estimated economic growth in the Eurozone at 0.7 percent. One of the latest forecasts, released in September by the consulting company Deloitte, also expects (as the European Commission does) the Eurozone economy to grow by 0.8 percent this year.[2]

It is most likely that the reality will not differ much from all the mentioned predictions.

The question, of course, is to what extent the problems faced by the German automotive industry will affect the economic growth of the Eurozone in the second half of this year.

A number of other sectors, as well as entire economies, including, for example, the Czech Republic, are linked to this key sector of the German economy. In addition, the German economy is the largest in the entire Eurozone, so it is clear that the condition of Germany will also affect the economy of the remaining countries using the euro as a currency.

But if the crisis of the German car industry does not last too long, it might not have a fatal impact on the Eurozone economy. According to Deloitte's forecast, the current economic growth of the Eurozone is relatively heavily dependent on household consumption expenditures. It seems that European households still have significant savings from the time of the covid crisis, and at the same time their real incomes are increasing again.

Private investments, which have also stagnated in recent months and years, could also help the economy. Therefore, if the dreaded "black swan" does not arrive, the Eurozone economy could indeed achieve economic growth close to one percent this year, and even accelerate to the 1.4 percent expected by the European Commission next year.

However, from a long-term perspective, the economy not only of the eurozone, but also of the entire European Union needs radical restructuring. The analysis of the former governor of the European Central Bank, Mario Draghi, presented a relatively overwhelming report card to the European Union.

The author notes that the EU economy has been losing its competitiveness for a long time, and thus the ability for faster economic growth. Compared to the US, Europe is a less suitable place to invest in innovation, faces relatively expensive energy and is not able to benefit sufficiently from the European single market. But that's another topic.

Peter Svoreň, analyst of ApmeFX

[1,2] Forward-looking statements are based on assumptions and current expectations, which may be inaccurate, or based on the current economic environment which is subject to change. Such statements are not guaranteeing of future performance. They involve risks and other uncertainties which are difficult to predict. Results could differ materially from those expressed or implied in any forward-looking statements.

Disclaimer:

The material herein is considered as marketing communication under the relevant laws and regulations, and as such is not a subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and should not be construed as containing investment advice, or an investment recommendation, or an offer of or solicitation for any transactions in financial instruments. The published content is intended for educational/informational purposes only. It does not take into account readers’ financial situation, personal experience or investment objectives. APME FX Trading Europe Ltd makes no representation that the information provided is accurate, current or complete; and therefore, assumes no liability for any losses arising from investments based on the supplied content. The past performance is not a guarantee of future results.

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