Euro zone set for growth over next ‘couple’ of years – Lane

August 22, 2023

The euro zone economy will keep growing in the coming years and is unlikely to experience a deep or sustained recession, European Central Bank chief economist Philip Lane said today.

The economy of the 20-nation bloc sharing the euro has broadly stagnated for the past three quarters as manufacturing is deep in recession.

Economists see no rebound this year, pointing to just barely positive GDP growth in 2023.

“There’s a lot of reasons to believe the European economy will grow over the next couple of years,” Professor Lane said in a podcast published by the ECB.

A key argument is that the euro zone economy still has not caught up with its pre-pandemic trend so this catch up process should boost growth.

“We’re well below the level of the economy we might have expected (if) the pandemic had not happened,” Lane said. “That kind of trendline we would expect to emerge over time.”

Energy prices are sharply lower than in the initial months of Russia’s war in Ukraine and that too will eventually feed through to consumers, leaving households with greater disposable income, Lane argued.

“Over time, households should be in a better financial position,” Lane said.

The ECB has been raising interest rates at a record pace for the past year to cool demand and inflation, but Lane argued that the ECB did not want to drive demand “deeply negative” and the goal was merely to make sure it grew more slowly than supply.

The ECB expects the euro zone economy to grow by 0.9% this year and 1.5% next year, although some economists see these forecasts as too optimistic.

Article Source: Euro zone set for growth over next ‘couple’ of years – Lane – RTE

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