A lasting – and uneven – loss of income

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Eurozone 2023-2024 outlook shock behind, shock ahead

The lengthy post-pandemic rebound wave is settling down, and growth normalisation is hitting another, more lasting shock from the war in Ukraine.

This is an exceptional slowdown for the economy: annual growth of 5.5% in Q122 fell to 2.3% in Q3. The factor of the war’s impact on the cycle. With special support measures cale of this decline is not just a withdrawn, and surplus demand back to normal after having been being ‘bottled up’, the cycle is back to a more ‘normal’ magnitude. Still, this downward spiral is bigger than the Eurozone’s last (nonpandemic) recession (2011-12). Consumption, driven by substantial surplus savings, might be resilient enough to delay the contraction we expect in Q422 and Q123. The economic downturn cannot be avoided, though, and a new growth pattern threatens to be weaker for a long time and lower than (also weaker) potential growth. We expect GDP to grow by 0.1% in 2023 and 1.1% in 2024.