Europe to see modest economic rebound in 2024: UN report

The global economy, having shown unexpected resilience in 2023, continues to face short-term risks and structural vulnerabilities. The primary concern is the prospect of a protracted era of tight credit and high borrowing costs, which poses significant challenges for a debt-laden world economy. These conditions are especially crucial as there is an urgent need for increased investments to stimulate growth, combat climate change, and make progress towards the sustainable development goals (SDGs).

Europe, in particular, will feel the brunt of monetary tightening. The impact of previous rate hikes and reduced liquidity is now becoming evident in the real economy. Consumer and business confidence across Europe remains subdued, despite a slight easing of the energy crisis. The European Union (EU) expects an average economic growth of 1.2 per cent in 2024, a slight increase from 0.5 per cent in 2023 but still lagging behind the pre-pandemic average of about 2 per cent. This mild recovery is likely to be supported by an increase in consumer spending, driven by slowing inflation, rising real wages, and strong labour markets, as per the report.

Additionally, demand for EU exports, which saw a significant decline last year, is anticipated to recover as global trade gradually improves. However, fiscal policies are expected to tighten, with governments scaling back on energy subsidies and inflation support measures, while starting a gradual fiscal consolidation.

Among the larger European economies, Germany faces notable challenges. The country saw a 0.1 per cent contraction in its GDP in 2023 and anticipates a modest recovery to 0.7 per cent in 2024. Structural challenges, such as labour shortages, reliance on energy-intensive industries, and inadequate investment in areas like digital infrastructure, continue to impede growth. In the UK, high interest rates and fiscal tightening are significant obstacles to growth, with projections suggesting a slowdown from 0.5 per cent in 2023 to 0.4 per cent in 2024.

The labour market across Europe, though showing signs of cooling, remains robust. Inflation is expected to decline further, with the European Union forecasted to see a decrease from 5.9 per cent in 2023 to 3.1 per cent in 2024, and the UK from 7.4 per cent to 3.6 per cent. Major central banks in Europe have indicated that policy rates are nearing their peak. However, they are likely to maintain a restrictive monetary policy until inflation consistently approaches the target.

Despite the economic challenges, the European labour market has shown resilience. Signs of a slowdown are emerging, with employment growth decelerating, job vacancies declining, and firms' employment expectations deteriorating. Unemployment rates might increase slightly in 2024, but labour markets are expected to stay relatively tight, given the ongoing labour shortages in both high-skilled and low-skilled occupations.

Fibre2Fashion News Desk (DP)