EY – European Economic outlook, Jan 24

The European economy is currently experiencing stagnation, according to EY. Factors such as suppressed real incomes, weak international demand, and the tightening of monetary policy have contributed to a lack of growth. Prices remain high, resulting in limited growth in consumption and real wages being below their peak. High interest rates have also affected debt servicing costs and credit conditions, leading to constrained consumer spending and business investment. Manufacturing activity has been curbed due to weak domestic and external demand. However, the labor market and investment have provided some resilience. Non-residential business investment has remained steady, and employment has continued to grow. The performance across sectors and countries has varied, with energy-intensive and housing-related manufacturing in recession and service sectors continuing to grow. EY expects the European economy to recover gradually in 2024, supported by factors such as increasing real incomes and government investment. However, annual average growth is projected to remain weak in 2024, with a recovery anticipated in 2025. Poland and Hungary are predicted to have standout performances in 2024, driven by declining inflation and strong wage growth.