The recession, which is a turning point for the economy in Europe, is on its way

The recession, which is a turning point for the economy in Europe, is on its way

The European economy is at a crossroads, and most EU countries will enter a recession by the end of this year that will last until spring 2023. In its annual autumn economic forecast, the European Commission says the Netherlands will also experience a slight decline in the economy.

A recession is defined as two consecutive quarters of economic contraction. The anticipated recession is the result of Russia’s war against Ukraine and the ensuing energy crisis and high inflation. This affects the purchasing power of households and puts pressure on industrial production. Of all developed economies, the EU is the most affected, due to its geographical proximity to the war and its heavy dependence on Russian gas.

According to the committee, economic prospects are surrounded by “extraordinarily great uncertainty” as the war in Russia still continues and further economic disruption cannot be ruled out. Adverse gas market developments and possible gas shortages in the winter of 2023 and 2024 pose a threat to most economies.

Lean growth

Thanks to the strong economic recovery in the first half of the year, most countries still have a solid 3.3 percent growth rate for the full year; this is even better than the 2.7 percent estimate released by the Commission in the summer. Dutch growth will be as much as 4.6 percent this year.

For 2023, economic growth for the EU will fall to 0.3 percent. The economy will only recover in 2024 and reach an average of 1.6 percent. For the Netherlands, the committee expects an understatement of 0.6 percent in 2023.

For now, inflation in the EU remains high at an average of 9.3 percent annually, but prices will remain high at an average of 7 percent next year. Inflation in the Netherlands is higher than the rest of the EU, with an average of 11.6 percent this year. The committee does not expect inflation to drop to 3 percent by 2024.

With all the energy support measures, government deficits are growing again and government debt is rising everywhere.

Source: NOS