The Strategist

Eurozone enters recession in Q1 2023

06/09/2023 - 03:32

The first quarter of this year saw a 0.1% decline in GDP in the euro area, according to figures from the European statistical office Eurostat. Similar GDP decrease in the fourth quarter of 2022 came before this. A recession is indicated by two consecutive quarters of falling GDP.

Ireland experienced a major decline in GDP of 4.6%, which was the largest effect of the decline in the eurozone's GDP in the first quarter of 2023. The Netherlands' economy shrank by 0.7%, while Lithuania's lost 2.1%. Germany's GDP decreased by 0.3% in the first quarter despite the country being in a recession.

According to experts, the second and third quarters will "remain depressing" for the eurozone economy. Andrew Cunningham, chief economist for Europe at Capital Economics, told CNN that the combination of high inflation and rising interest rates hit the consumer spending hard. 

S&P Global Market Intelligence's Diego Iscaro, who oversees European economics, predicts that the slump will last through the end of the year. He adds that despite this, it is not anticipated that this circumstance will "prevent the ECB from raising interest rates next week." While rates will likely continue to rise in the near future, the expert asserts that "they are already approaching the peak of growth" despite this.