European Union Raises Economic Growth Forecast Amid Falling Natural Gas Prices

Strategic Insights -

The European Union's economic growth is expected to narrowly avoid a recession, thanks to the high level of natural gas storage and a decrease in gas prices. The winter economic outlook released by the European Commission forecasts a 0.8 percent growth for the 20 EU countries that use the euro currency and 0.9 percent for the broader 27-nation bloc. The improved outlook is attributed to the effort to secure new supplies of natural gas and a 25 percent drop in consumption due to high prices and conservation measures.

Key Takeaways:

  • The European Union's economic growth forecast for 2023 has been raised to 0.8 percent for the 20 EU countries that use the euro currency and 0.9 percent for the broader 27-nation bloc.
  • The growth forecast is an increase from 0.3 percent expected in the last outlook from November.
  • The improved outlook is attributed to the high level of natural gas storage and a decrease in gas prices from astronomical highs.
  • Natural gas prices reached record levels last summer, rising to 18 times above their pre-crisis level, before falling since then.
  • Despite the improved outlook, the European Commission warned that high prices will continue to hold back the economy for months to come.
  • The economy is expected to avoid a contraction in the current January-to-March quarter, indicating no technical recession.
  • Paolo Gentiloni, European commissioner for economy, cited the effort to line up new supplies of natural gas and a 25 percent drop in use due to high prices and conservation measures as the major achievement behind the improved outlook.

Statistics:

  • Natural gas prices have fallen from 18 times above their pre-crisis level to three times higher than before Russia started massing troops on Ukraine's border.
  • The European Commission forecasts a 0.8 percent growth for the 20 EU countries that use the euro currency.
  • The broad 27-nation bloc is expected to grow by 0.9 percent.
  • Gas consumption has dropped by 25 percent due to high prices and conservation measures.

Sources:

  • The Associated Press
  • The European Commission