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In its new Winter 2024 Economic Forecast released yesterday, the European commission said inflation will ease faster than previously expected. EU27 inflation is set to decrease from 6.3% in 2023 to 3.0% in 2024 and 2.5% in 2025. The highest inflation rates in 2024 are expected to come in Romania, Poland and Hungary, all above 4.5%. Denmark, Sweden and Finland meanwhile are expected to see below 2% inflation rates in 2024.
Looking ahead, the EU economy is set for gradual acceleration, with growth in 2024 expected to be just 0.9%, up to 1.7% in 2025. As inflation slows, real wage growth and robust employment are likely to fuel consumption recovery, the commission said. Investments are anticipated to rise, aided by easing credit conditions. Malta, Romania, Cyprus, Poland and Croatia are expected to be the five fastest growing economies in 2024. On the other end, Netherlands, Germany and Sweden are expected to see below 0.5% growth this year.
Still, the Commissions sees several downside risks looming: “Additional trade disruptions could bring renewed stress to supply chains, hampering production and adding price pressures. Domestically, a faster recovery of consumption, higher-than-expected wage growth and a lower-than-anticipated fall in profit margins could hold back the disinflation process.”