European Economic & Investment Outlook 2024

GROWTH FORECASTS

IS SOUTHERN EUROPE THE NEW HELM OF GROWTH?

Despite the economy demonstrating notable resilience, there has been a widespread downgrade in growth forecasts, especially for 2023 and 2024. Economic expansion has slowed, as the economy deals with the repercussions of elevated interest rates, the Russian-Ukraine conflict, and additional geopolitical tensions in the Middle East.

We expect euro area real annual GDP growth of 0.5% in 2023, followed by 0.9% in 2024. The UK economy will grow by 0.4% in 2023, followed by 0.3% annually in 2024.

A surge in tourism and services has resulted in countries heavily reliant on these sectors contributing more to the region's overall growth. Thanks to the favourable exchange rate US travellers¹ have been flocking to Europe. This will assist in sustaining the momentum of Europe's tourism recovery, even in the face of economic challenges. As a result, Portugal, Spain, France, and Italy are expected to be the largest contributors to growth in 2023, growing annually by 2.2%, 1.2%, 0.9%, and 0.8%, respectively. This was not the historical norm. The industrial composition of the euro area was less favourable for Southern Europe. The slower rebound in the services sector since the global financial crisis, coupled with austerity measures, resulted in what is now characterised as a 'lost decade' for the region. It's worth mentioning that in addition to the expansion of the services sectors, the conclusion of austerity programs and the improvements in public finances are expected to contribute to the growth of Southern European economies. ¹ Wall Street Journal: American Travelers Are Shunning the U.S. for Europe

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EURO AREA GDP GROWTH FORECASTS (% Y/Y)

UK GDP GROWTH FORECASTS (% Y/Y)

A surge in tourism and services has resulted in countries heavily reliant on these sectors contributing more to the regions overall growth.

EUROZONE GROWTH FORECASTS HAVE BEEN CONTINUOUSLY DOWNGRADED THIS YEAR

UK GROWTH FORECASTS HAVE BEEN CONTINUOUSLY UPGRADED THIS YEAR

1.2

0.4

1.0

0.2

0.8

0.0

0.6

-0.2

0.4

-0.4

0.2

MAR 23

APR 23

MAY 23

JUN 23

JUL 23

AUG 23

SEP 23

OCT 23

0.0

-0.6

2023

2023

LARGEST DOWNGRADES FOR 2024 OUTLOOK

1.2

1.0

1.0

0.8

0.8

0.6

0.6

0.4

0.4

0.2

0.2

0.0

0.0

2024

2024

Source: Consensus Economic

6 | ECONOMIC OUTLOOK 2024

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