The first three months of the year saw a recession in the Eurozone, which consists of 20 member nations of the European Union. According to data from Eurostat, the statistics arm of the EU, after revised estimates, the GDP decreased by 0.1% in both the first quarter of 2023 and the last three months of 2022.
Technical recessions are described as having negative growth for two consecutive quarters. While Germany, the biggest economy in the EU, also experienced two straight quarters of contraction, the UK was able to avoid the recession.
Ireland’s 4.6% Q1 GDP decline weighed on the 20-country single currency area’s overall growth.
This comes after a challenging year for European nations brought on by the ongoing conflict between Russia and Ukraine, which drove up petrol costs significantly. Even though the price of oil and gas has decreased recently, the sharp increase had a significant influence on family confidence and compelled them to cut back on consumption.
In a research note, Capital Economics stated that the second quarter’s GDP is “most likely to contract again as the effects of monetary policy tightening continue to feed through.” The impact of rising interest rates and inflation on domestic demand has been significant.
Christine Lagarde, the head of the ECB, stated that inflation is still “too high” because it is far higher than the ECB’s goal inflation rate of 2.0%. A slower rate of growth could be approaching, he added.