The eurozone experienced the mildest possible recession during the winter months after Russia’s invasion of Ukraine pushed up energy prices.
Thursday’s revised data for the 20-country economy indicate that the bloc shrank by 0.1 percent between January and March, which corresponds to the contraction experienced in the last quarter of 2022. Thus, the Eurozone economy contracted in the first 6 months after the pandemic.
Analysts surveyed by Bloomberg had predicted that production had stagnated at the start of the year.
The results came as a surprise after politicians and European Central Bank officials said repeatedly that a recession could be avoided even if inflation had soared to its highest level since the introduction of the euro.
Policymakers, on the other hand, will be encouraged that their billions of euros in aid to households across the bloc means that fears of far more serious economic damage have not materialized in the wake of the Russian invasion.
With growth likely to return this quarter, governments will continue to withdraw financial support. However, it is considered unlikely that the ECB will change course as it is nearing the end of its historic cycle of rate hikes and it sees beating inflation as a prerequisite for sustainable economic expansion.
According to Eurostat, the Eurozone’s first-quarter weakness was due to the decline in government and household spending. Inventories contributed negatively, while trade supported production.
The data revealed that Greece and Ireland fell into recession after figures from Germany, Europe’s largest economy, and Estonia had not grown since the end of 2021. On the other hand, Lithuania, Malta and the Netherlands also shrank in the first quarter.
The outlook for the eurozone has since improved. The European Commission raised its outlook for the region last month, predicting GDP to grow by 1.1 percent this year and 1.6 percent in 2024.