EC predicts only Estonia and Sweden to be in recession in Europe

Money.
Money. Source: Siim Lõvi/ERR

According to the European Commission's spring economic forecast, Estonia's gross domestic product (GDP) will decline by 0.4 percent this year and increase by 3.1 percent next year.

The GDP of Estonia is expected to fall by 0.4 percent this year. Private consumption is low and investment growth is expected to slow down. The European Commission observes that Estonia's key trading partners' slow economic development continues to limit exports.

It is anticipated, however, that Estonia's economic growth will increase to 3.1 percent in 2024 as a result of income growth, which will be supported by falling inflation and accelerating wage growth.

Only Sweden's GDP will also decline, by 0.5 percent, alongside Estonia's.

According to the European Commission, Estonian inflation will remain high this year. It will fall steadily and remain at 9.2 percent on average in 2023. Inflation should fall to 2.8 percent by 2024.

Due to persistent price pressure, the European Commission has revised its inflation forecast for the euro area to 5.8 percent in 2023 and 2.8 percent in 2024, an increase from its winter projection.

European Commission Spring Economic Forecast. Source: European Commission

EC: the government sector's budget deficit should decline in 2024

The European Union's government budget deficit decreased to 3.4 percent of GDP in 2022. According to the commission, declining energy prices in 2023 and 2024 should allow governments to phase out energy subsidies, promoting additional budget deficit reductions to 3.1 percent and 2.4 percent of GDP, respectively. The Estonian government sector's deficit would rise to 3.1 percent of GDP this year before falling back the next year.

The national debt is expected to rise to 21.3 percent of GDP next year.

The European Union's general government debt-to-GDP ratio will decrease below 83 percent in 2024, but will remain higher than the pre-pandemic level.

European Commission Spring Economic Forecast. The darker the green, the higher the GDP growth in 2023. Source: European Commission

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Editor: Marko Tooming, Kristina Kersa

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