After a strong first half of the year, real GDP growth is projected at 3.3% in 2022 and only 0.5% in 2023 owing to Russia’s war of aggression against Ukraine, monetary policy tightening and the global slowdown. Growth is projected to rebound to 1.4% in 2024 as consumption and investment pick up. Inflation is set to decline only gradually, remaining above target in 2024, fuelled by elevated energy prices and tight labour markets.
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The COVID-19 pandemic plunged the EU into its worst-ever recession and risks increasing inequalities, notably between regions. Thanks to a bold and innovative policy response, including a common instrument to finance national recovery plans (Next Generation EU), growth is rebounding, but ambitious reforms will be essential to heal the scars of the pandemic and succeed in the green and digital transitions.
The COVID-19 pandemic forced most euro area economies into repeated lockdowns in 2020 and early 2021 that lead the euro area into its deepest recession on record in 2020. The policy reaction to the crisis was large and rapid.
In light of the COVID-19 crisis, the top immediate policy priority is to ensure efficient use of Next Generation EU, a recovery plan combining loans and grants of about 5.5% of EU27 2019 GDP to support member states’ recovery policies. Successful roll-out and implementation of this support will be crucial to reinvigorate economic growth across the European Union, boost digitalisation and innovation, bolster resilience to future shocks and achieve climate and inclusiveness objectives.
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2021 Structural Reform Priorities