BRUSSELS, Jan. 30 (Xinhua) -- The eurozone economy is struggling to move forward in the downturn.
Xinhua News Agency reporter Kang Yi Shan Weiyi.
Preliminary statistics released by Eurostat on January 30 showed that the eurozone and EU economies grew zero in the fourth quarter of last year. Market analysts said that although the European economy has barely avoided a "technical recession", the outlook for 2024 is hardly optimistic due to factors such as heightened geopolitical tensions, continued monetary tightening, and weak global demand.
The engine stalled. According to the data, Germany's economy shrank by 03%, French economic growth stagnated. Analysts pointed out that as the engine of economic growth in the euro area, the economic downturn in Germany and France has dragged down the overall performance of the euro area.
Germany, known as the "locomotive of the European economy", was one of the worst performers among major advanced economies last year. Germany's industry, imports and exports will both show negative growth in 2023; Personal and consumer consumption also failed to support economic growth, with consumer spending declining for the first time in nearly 20 years. The analysis shows that rising costs in energy-intensive industries, shortages of skilled workers, and insufficient investment in infrastructure and digital technologies are affecting Germany's economic growth.
Karsten Brzeski, head of macro research at ING, believes that the German economy is still on the verge of recession and stagnation due to a combination of geopolitical risks, economic cyclical problems and internal defects. The German Macroeconomic Policy Institute also said that the German economy will continue to shrink in the context of weak recovery, geopolitical turmoil, and monetary policy tightening.
Due to weak domestic demand, France's consumption, household and business investment fell in the fourth quarter of last year, dragging down the economy to zero growth quarter-on-quarter. ING expects the French economy to grow weaker this year than last year. Charlotte de Montpellier, senior economist at ING, analyzed that factors such as high interest rates, high inflation, declining purchasing power and weak corporate demand will continue to affect France's economic growth in 2024.
The signal is unknown. Observers point out that if inflation fails to fall further, European banks may not be able to stimulate the economy by cutting interest rates, which could trigger a "stagflation" phenomenon of sustained rising inflation and prolonged weak growth.
AXA Investment Management analysts Hugo Le Damani and François Cabo called for the ECB to cut interest rates "sooner rather than later". They believe that tightening policy has led to a downturn in the economy, and the upcoming Eurozone inflation data should be closely watched, which is crucial to "determine the start of the easing cycle".
Some market participants also said that in order to avoid a re-acceleration of inflation, the ECB will take a more cautious approach. Friedrich Heinemann, an economist at the Leibniz Institute for Economic Research in Germany, said that the ECB may make a decision to cut interest rates quickly due to the unsatisfactory economic situation, but only if inflation meets the medium-term target of 2%.
The European Central Bank (ECB) held a monetary policy meeting on January 25 and decided to keep the three key interest rates unchanged, and its latest monetary policy decision and statement did not provide clear clues about interest rate cuts. Preliminary statistics released by Eurostat on January 5 showed that inflation in the eurozone was calculated at an annualized rate of 29%, up from 24%。
At the moment, the market has mixed expectations for the ECB to cut interest rates. Some institutions are betting that the ECB will cut interest rates for the first time this spring, but others will delay the rate cut until June.
It hasn't bottomed out yet. Looking ahead to 2024, many analysts said that the eurozone economy has fallen into a long-term weak stagnation, and the factors that have dragged down European economic growth in the near future still exist, and the negative impact will be even more severe than last year.
The International Monetary Fund (IMF) released an update on the World Economic Outlook report on January 30, expecting the eurozone to grow by 09%, down 03 percentage points.
Jack Allen-Reynolds, a macroeconomist at market research firm Capital Economics, recently pointed out in an analysis report that the eurozone economy has been sluggish since the surge in natural gas ** in the third quarter of 2022 and the European Central Bank's interest rate hike. According to the report, the economic performance of the euro area is expected to remain difficult to improve in the first half of this year as the impact of the European Central Bank's monetary tightening policy continues to be felt and fiscal policy is more stringent.
Analysts said that due to the intensification of geopolitical risks and the rise of protectionism, the pressure on the European economy continues to increase. Recently, the risk of geopolitical conflict on the Red Sea Route, an important oil transportation route in the Middle East, has escalated sharply, which could exacerbate inflation again.
Some economists at Oxford Economics said the latest data "does not indicate a significant improvement in the European economy" and that the eurozone economy may shrink slightly in the first quarter of this year. ABN AMRO Financial Market Research also believes that the European economy will not be significantly ** this year.
Holger Schmiding, chief economist at Berenberg Bank in Germany, stressed that the eurozone economy "is still trying to bottom out."