Eurozone Officially In Recession As GDP Contracts
The Eurozone has officially entered a recessionary phase, as confirmed by Eurostat, the EU’s statistics agency. According to the agency, the Eurozone’s economy contracted for two consecutive quarters, leading to a decline in the region’s GDP by 0.1% in the first quarter of 2023 compared to the previous quarter. The previous quarter, Q4 2022, also saw a decrease in GDP by 0.1% in the Euro area.
Euro area #GDP -0.1% in Q1 2023, +1.0% compared with Q1 2022 https://t.co/CybdBFvQxH pic.twitter.com/jkkFXaUBaC
— EU_Eurostat (@EU_Eurostat) June 8, 2023
Consecutive GDP Contractions
Typically, two consecutive quarters of negative growth in real GDP indicate a technical recession. Additionally, the region’s Q4 2022 GDP has been revised down from the previously forecasted 0% to -0.1%. This revision follows the flash estimates released in April, which indicated a 0.1% growth in the economy in the first quarter of this year after seasonal adjustments.
Germany, the largest economy in Europe, recently confirmed its entry into recession. The country’s consumer spending was negatively impacted by last year’s energy price shock, leading to a decline in household spending. This downturn in Germany’s economy has had spill-over effects on the broader Eurozone.
Among other member states, Poland recorded the highest increase in GDP (+3.8%) compared to the previous quarter, followed by Luxembourg (+2.0%) and Portugal (+1.6%). On the other hand, the largest dips were observed in Ireland (-4.6%), Lithuania (-2.1%), and the Netherlands (-0.7%).
Employment Resilience
Despite the economic downturn, employment in the Eurozone continued to rise, increasing by 0.6% in Q1 of this year. This represents an improvement compared to the previous quarter, where the employment rate stood at 0.3%. Eurostat estimates that in the first quarter of 2023, there were 216.1 million employed individuals in the EU, with 168.2 million in the euro area, based on seasonally adjusted figures.
The Eurozone’s entry into recession raises concerns about the overall economic health of the region. Policymakers will likely face the challenge of stimulating growth and addressing the factors contributing to the downturn, such as the energy price shock and inflationary pressures on household spending.
