The European Commission has marked up its economic growth forecast for the bloc this year to narrowly avoid a recession that had been expected a few months ago.The Winter Economic Forecast published by the commission on Monday predicted that the 27-member EU economy would grow 0.8 percent this year and that the 20-member euro area economy would rise 0.9 percent. Croatia became the 20th member of the euro area on Jan 1.The figures for the EU and for the euro area are respectively 0.5 and 0.6 percentage points higher than in the autumn forecast in November.The growth forecast for next year remains unchanged, at 1.6 percent and 1.5 percent, respectively, for the EU and euro area.Growth last year was put at 3.5 percent in both the EU and euro area.In its latest revised World Economic Outlook on Jan 31, the International Monetary Fund predicted the euro area economy would grow 0.7 percent this year and 1.6 percent next year."Europe's economy is proving resilient in the face of current challenges," said European Commission Executive Vice-President Valdis Dombrovskis.Challenges ahead"We are able to narrowly avoid a recession, but we still face multiple challenges, so this is no time for complacency."The European Commission said favorable developments since the autumn forecast have improved the growth outlook for this year."Continued diversification of supply sources and a sharp drop in consumption have left gas storage levels above the seasonal average of past years, and wholesale gas prices have fallen well below prewar levels," it said, referring to the nearly one-year-long Russia-Ukraine conflict that has badly hurt the economy of many EU member states.The EU labor market has continued to perform strongly, with the unemployment rate remaining at an all-time low of 6.1 percent until the end of last year.The forecast on Monday slightly marked down the projections for inflation for this year and next year.Headwinds remain strong, the report said. Consumers and businesses continue to face high energy costs, and core inflation was still rising last month, further eroding households' purchasing power. Core inflation refers to the inflation in goods and services but does not include food and energy.As inflationary pressures persist, monetary tightening is set to continue, weighing on business activity and exerting a drag on investment, the report said.The EU had record inflation of 10.6 percent in October, but it has since come down a bit. Inflation in the euro area last month was put at 8.5 percent, driven mainly by falling energy prices.Uncertainty surrounding the forecast remains high, the report said, but risks to growth are broadly balanced. Energy prices due to domestic and global demands will be the main factors affecting the forecast, it said.The European Commission has marked up its economic growth forecast for the bloc this year to narrowly avoid a recession that had been expected a few months ago.The Winter Economic Forecast published by the commission on Monday predicted that the 27-member EU economy would grow 0.8 percent this year and that the 20-member euro area economy would rise 0.9 percent. Croatia became the 20th member of the euro area on Jan 1.The figures for the EU and for the euro area are respectively 0.5 and 0.6 percentage points higher than in the autumn forecast in November.The growth forecast for next year remains unchanged, at 1.6 percent and 1.5 percent, respectively, for the EU and euro area.Growth last year was put at 3.5 percent in both the EU and euro area.In its latest revised World Economic Outlook on Jan 31, the International Monetary Fund predicted the euro area economy would grow 0.7 percent this year and 1.6 percent next year."Europe's economy is proving resilient in the face of current challenges," said European Commission Executive Vice-President Valdis Dombrovskis.Challenges ahead"We are able to narrowly avoid a recession, but we still face multiple challenges, so this is no time for complacency."The European Commission said favorable developments since the autumn forecast have improved the growth outlook for this year."Continued diversification of supply sources and a sharp drop in consumption have left gas storage levels above the seasonal average of past years, and wholesale gas prices have fallen well below prewar levels," it said, referring to the nearly one-year-long Russia-Ukraine conflict that has badly hurt the economy of many EU member states.The EU labor market has continued to perform strongly, with the unemployment rate remaining at an all-time low of 6.1 percent until the end of last year.The forecast on Monday slightly marked down the projections for inflation for this year and next year.Headwinds remain strong, the report said. Consumers and businesses continue to face high energy costs, and core inflation was still rising last month, further eroding households' purchasing power. Core inflation refers to the inflation in goods and services but does not include food and energy.As inflationary pressures persist, monetary tightening is set to continue, weighing on business activity and exerting a drag on investment, the report said.The EU had record inflation of 10.6 percent in October, but it has since come down a bit. Inflation in the euro area last month was put at 8.5 percent, driven mainly by falling energy prices.Uncertainty surrounding the forecast remains high, the report said, but risks to growth are broadly balanced. Energy prices due to domestic and global demands will be the main factors affecting the forecast, it said.
