BusinessEurope Economic Outlook Spring 2023 - Recession avoided for the EU economy, but challenges remain

Economic situation

Whilst falling energy prices through the mild winter have helped steer the EU economy away from the recession, the situation remains challenging for many businesses.

Our forecast is for growth of just 0.7% in the EU in 2023, with 1.6% growth in 2024, provided downside risks, particularly around continuing geopolitical instability don’t materialise.

We expect economic growth to remain subdued despite the decline of supply chain pressures. Energy prices remain significantly above their long-term average while falling consumer confidence and increasing borrowing costs will increasingly act as a drag on consumption and investment.

Economic projections

Policy recommendation

• A further normalisation of monetary policy may weaken short-term growth but remains essential to manage inflation expectations.
• With financing costs rising for businesses, and particularly given the investments required to meet the digital and green transition, policymakers must redouble their efforts to make it more attractive for businesses to invest in the EU.
• Swift agreement on the revision of the Stability and Growth Pact (SGP) is essential to assist Members States in strengthening their public finances and ensure they have the capacity to respond to future challenges. The revised rules must support growth-enhancing structural reforms and public investment, as well as increasing ownership of the plans in Member States. But the rules must not provide excessive flexibility in their interpretation. It is important that, as the Commission proposes, the reference values of 3% of GDP for government deficits and 60% for government debt, continue to be at the basis of the Economic Governance Framework.