Euro Zone Poised for Growth in the Coming Years

FRANKFURT (Reuters) – Philip Lane, the chief economist of the European Central Bank, stated on Friday that the euro zone economy is expected to continue growing over the next few years and is unlikely to face a deep or prolonged recession.

The economy of the 20-member bloc using the euro has experienced stagnation over the last three quarters, primarily due to a significant downturn in manufacturing. Economists anticipate little improvement this year, predicting only marginal positive GDP growth in 2023.

“There are many reasons to believe that the European economy will grow in the next couple of years,” Lane mentioned in a podcast released by the ECB.

One major point he highlighted is that the euro zone economy has yet to return to its pre-pandemic growth trajectory, indicating that this recovery could stimulate future growth.

“We’re currently operating well below where we might have been without the pandemic,” Lane explained. “We expect this upward trend to gradually reemerge.”

He also noted that energy prices have significantly decreased since the early stages of Russia’s conflict in Ukraine, which is expected to benefit consumers by providing households with increased disposable income.

“Over time, households should find themselves in a more favorable financial situation,” Lane added.

The ECB has been increasing interest rates sharply over the past year to manage demand and inflation. However, Lane emphasized that the aim is not to drive demand into negative territory but rather to ensure that its growth remains slower than that of supply.

The ECB projects the euro zone economy will grow by 0.9% this year and by 1.5% in the following year, although some economists consider these forecasts may be overly optimistic.