ECB: Euro zone faces the risk of declining growth and recession

European Central Bank Vice President Louis de Guindos said on Wednesday that the euro zone may have been in recession in the last quarter of last year, and that expectations remain weak, adding that the recent rapid slowdown in inflation is likely to stop now. ‎

According to Reuters, growth in the euro zone stabilized around zero for most of 2023 and witnessed only a slight recovery this year, which helped calm inflation, which has exceeded the European Central Bank’s target for years and forced policymakers to raise interest rates to levels. record last year

De Gendos said in Madrid, “Weak indicators point to an economic contraction in December as well, which confirms the possibility of a technical recession in the second half of 2023 and weak expectations in the near term.”

He added, “The data received indicate that the future is still ambiguous, and that the prospects tend towards the downward trend.”

De Guindos said weak economic growth was widespread, with the construction and manufacturing sectors particularly hard hit and the services sector likely to follow in the coming months.

Regarding policy, de Guindos did not provide any new message, and merely repeated the European Central Bank’s guidance that maintaining the deposit interest rate of four percent “for a sufficiently long period” would help reduce price growth to the European Central Bank’s target of two. percent

Traders expect at least five interest rate cuts this year, with the first step coming in March or April, a timetable that many policymakers have described as exaggerated given the ongoing price pressures.

The European Central Bank’s expectations indicate that inflation will return to the target level only next year, but a group of experts in the private sector disagree with them and believe that the European Central Bank is underestimating the decline in inflation in the same way it misestimated inflation on its way to rise.