Euro zone: growth forecasts revised upwards

According to a number of economists, including those at US bank Goldman Sachs, the Eurozone should avoid recession in 2023. Growth forecasts have been revised upwards, thanks to factors such as high gas inventories, resilient household consumption and a buoyant labor market.

High gas inventories and falling energy prices

For the first time in a long time, the threat of a fall in eurozone GDP in 2023 seems to be receding. Several economists are revising their growth forecasts upwards, following the example of the economists at Wall Street bank Goldman Sachs, who now anticipate 0.6% growth in 2023 for the eurozone. In December, they were forecasting a 0.1% recession.

Despite the energy crisis, they are forecasting growth of 0.1% in the first quarter of 2023, with Spain and France showing a more marked increase than Italy and Germany, due in particular to the greater diversification of their energy supply sources.


Various factors explain this slight upturn, starting with the high level of gas stocks in Europe. Mild temperatures have reduced demand, and liquefied natural gas imports have risen by 60% compared with 2021. As a result, gas storage reached 88% in December 2022, an unprecedented level for this time of year.

Faced with the gas shortage, the European industrial sector was one of the most reactive, reducing consumption (-15% for German industry) while increasing production by 1% in November. Fears of power cuts are receding, and gas prices are falling.

Inflation stalls while consumption holds up

Falling energy prices helped inflation to stall in December for the second month running. It stood at 9.2% year-on-year in December in the eurozone, compared with 10.1% in November and 10.6% in October.

Disinflation seems to be taking hold without the real economy faltering, as the example of Germany illustrates. Although it is the eurozone country most threatened economically by Russia's invasion of Ukraine, its GDP did not shrink as many had feared, but stagnated in Q4 2022 and recorded a slight increase of 1.9% over the year as a whole.

The surplus savings accumulated by households between the start of the Covid-19 pandemic and the end of 2021 have helped consumption to hold up. The various measures taken by eurozone governments to boost purchasing power have also helped to sustain consumption.

As for the labor market, it remains buoyant in the eurozone, which in the 3rd quarter added 3 million jobs compared with pre-Covid figures at the end of 2019. Employment is 2% higher than before the health crisis, and unemployment, at 6.5%, is at its lowest level for 30 years.

Paradoxically, however, this situation gives rise to fears of a price-wage loop: tensions on the labor market are likely to encourage wage increases in an inflationary context, which in turn would further accelerate inflation. The European Central Bank could then be forced to tighten monetary conditions even further.