Economy Watch: European View (January 2024)

The Euro Area has likely fell into a technical, shallow and short-lived recession in H2 2023 as tight monetary policy conditions continued to work their way through the economy. Inflation, a key driver of strict monetary policy decisions by the ECB, increased in December to 2.9%.  Weaker-than-expected growth in Q4 implies that the Euro Area enters 2024 from a weaker position than a month ago. As a result, we now expect the region to grow by 0.6% in 2024 (versus 0.7% a month ago), while keeping our 2025 forecasts unchanged.