European Central Bank points to weak economic growth for next year

The president of the points to the weak growth of the European economy. Christine Lagarde believes that the recovery could gain momentum later on but warns of geopolitical risks.

The inflation rate has fallen in recent months after recording historic values ​​due to the reopening of the post-covid-19 pandemic economy, the energy crisis and the economic consequences of the war in Ukraine, but it is still above the 2% target set by the ECB for price stability.

In mid-October, the ECB lowered its benchmark interest rate by 25 basis points to 3.25%, and this was the third cut of the year, in a context of moderating inflation and slowing economic activity in the short term.

Christine Lagarde recalled precisely the “moderate growth in the first half of this year” of the Euro Zone, after five quarters of stagnation, with a recent improvement in real Gross Domestic Product (GDP) in the third quarter, of 0.4%, driven in part by temporary factors such as the Paris Olympic Games.

“However, survey-based data suggests that growth will be weaker in the near term, due to slowing growth in the services sector and continued contraction in manufacturing, [mas]At a later stage, the economic recovery of the euro zone should begin to gain some momentum [já que] “Consumer expenditure is expected to increase as real incomes rise and investment is expected to recover as the impact of the previous monetary policy contraction wears off,” he said.

Still, Christine Lagarde said that “the medium-term economic outlook is, however, uncertain and dominated by downside risks.”

“Geopolitical risks are high, with increasing threats to international trade, and high levels of trade openness and integration in global supply chains make the eurozone vulnerable to external shocks, with potential trade barriers threatening manufacturing and investment “, he added.