Economists working under the leadership of Sven Jari Stehn are now forecasting that eurozone GDP will grow by 0.6% in 2023. Previously, they predicted an economic contraction of 0.1% for the region.
There are three main reasons for Goldman Sachs' new forecast: the first is that the European industrial sector has been surprisingly resilient. The second reason is that natural gas prices continue to fall sharply. Finally, China is reopening its economy earlier than expected.
According to Eurostat data last week, consumer price growth in the eurozone slowed to 9.2% in December from 10.1% a month earlier. The bank's analysts expect inflation to fall to 3.3% by the end of the year, mainly due to lower commodity prices.
Goldman Sachs also expects the European Central Bank to continue raising interest rates. The ECB is forecast to raise interest rates by 50 basis points in February and March, and eventually raise the key interest rate to 3.25% by May, where it is forecast to remain until the end of 2024.
On the other hand, the International Monetary Fund (IMF) is more negative. The IMF chief warned in January that a third of the world economy would be in recession this year, and last October the IMF cut its global economic growth outlook for 2023 to 2.7%. It then forecast GDP growth for the eurozone to slow to 0.5% in 2023. It cited the war in Ukraine, persistently high energy prices and higher interest rates as the main factors.