Eurozone – 2023-2024 Scenario: the bumpy road back to normal

Eurozone – 2023-2024 Scenario


  • Summary
  • Recent developments and short-term scenario
  • Themes of the scenario
  • Focus: inflation and its new drivers
  • The policy-mix

In summary

After overcoming the consequences of the pandemic in 2021 and taking the brunt of the energy crisis in 2022, it looks like 2023 might be the year we move past the effects of the energy crisis. After absorbing these extraordinary shocks, we will return to more usual dynamics, with Eurozone YoY growth brutally slowing down from 5.5% in Q122 to 1% in Q123. This dive does not foretell a recession, but instead a normalisation in behaviours following some major shocks that set off an abnormal amplitude of the cycle. The slowdown is being aggravated by economic policies that are mutating from exceptional support into a more restrictive stance, with a shift in monetary policy that is preceding the one in fiscal policy. 

Eurozone – 2023-2024 Scenario

Starting in Q2, our scenario shows moderate positive quarterly sequential growth. So the scenario is the result of opposing forces: the positive impact of tensions easing on global value chains and energy prices settling is providing a positive countershock and offsetting – if only partially – the drag of economic policies on activity. For the time being, the pressure points that could tip the cycle are not all lined up. Job creation is still very dynamic and, most of all, the strength of the service sector continues to drive margins and inflation. As monetary restriction ramps up, however, inflation shock will subside, giving consumers back their rightful purchasing power. And so we are projecting modest growth of 0.6% in 2023 and 1.3% in 2024, still beneath the Eurozone's potential.