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Is it the start of Eurozone Recession in 2023? Increased fuel cost has surged inflation rate and sanctions on Russia are really hurting European economies.
The latest reports suggest that the Eurozone recession has begun. The 20 nation-bloc is facing economic issues due to a shrinking economy. The economy of Europe’s 20 countries has contracted by 0.1% in the first quarter of 2023. Eurozone countries faced the same issue in the last quarter of 2022.
Economy experts and analysts have assessed revised figures. As rising prices are affecting common citizens, their purchasing capacity is declining. Experts consider it a recession because the Eurozone economy kept shrinking for more than three months in a row. Inflating food and energy prices are now troubling common households. The spending was reduced by 0.3% in the first quarter of 2023 and it is a serious concern for Eurozone nations.
Inflation is the root cause of the Eurozone recession 2023. European nations have been struggling to keep prices in check for several months. The European Central Bank raised key rates by 3.75% points since its monetary tightening campaign began in July 2022.
Energy prices escalated due to the Ukraine-Russia war and it had the worse effects on eurozone economies. Increased fuel prices led to inflation and reduced purchasing power. The situation can get worse if Eurozone nations do not find a solution to their energy crisis.
The GPD of the Eurozone recession country is contracting due to the recession. Eurostat recently reassessed the earlier estimates and lowered the growth forecast for 2022’s final quarter. It has also downgraded the growth forecast by 0.1% for the first quarter of 2023! This downgrading occurred due to a 0.1% GDP contraction in the last two quarters.
As observed by many economists and Eurostat, economic contraction occurred for two consecutive quarters. 2.2 is the threshold for technical recession and Eurozone has already crossed this threshold.
Economic growth predictions were not accurate for 2023. The EU had forecasted a 1.1% growth rate in the mid of May for all 20 nations. It will have to reassess predictions made in May.
Renowned economists, including ING Bank’s Charlotte de Montpellier, have predicted a lower growth rate. They believe the right growth figure should be around 0.5% for the entire Eurozone in 2023. Germany is a Eurozone recession country in which industrial production has become weaker.
Oil prices started surging in Europe when the European Union inflicted massive sanctions on Russia. The EU was heavily reliant on Russia for its energy demands. It bought gas and oil through pipelines, which is stopped since Russia invaded Ukraine. Reduced consumption is severely affecting domestic needs in all the eurozone countries. It is leading to a Eurozone recession due to the following factors:
Increasing interest rates and inflation have huge effects on domestic demand. These two things are leading to an economic slowdown and making things worse for common people in Europe.
Headline inflation is considered the best way of assessing the total inflation in a country. Economists consider commodities, including food and energy costs that are pretty volatile. The rate of headline inflation crossed 6.1% in May in eurozone countries. The European Central Bank was preparing for a 2.0% headline inflation, but it has far exceeded that threshold.
Exports have been negatively affected due to the slow recovery rate in China and the economic slowdown in the USA. These two factors have become additional challenges troubling eurozone nations and causing Eurozone recession 2023.
A: The reassessment of stats reveals eurozone economies are facing recession for the past two quarters.
A: It may lead to reduced sales, layoffs, and increased fuel costs, and it may stop the economic growth of eurozone recession countries.
A: Eurozone suffered the last recession in the mid of 2007.
A: Yes, it affects common people. It reduces people’s purchasing power and triggers several financial issues in families.
A: It may last 2 months to 18 months according to the leading economists in the world.
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