Eurozone Economy Unexpectedly Grows In Q4 But Weak 2023 Looms

• The eurozone eked out growth in the final three months of 2022, managing to avoid a recession even as sky-high energy costs, waning confidence and rising interest rates took a toll on the economy that is likely to persist into this year. Gross domestic product across the currency bloc expanded by a tiny 0.1% in the fourth quarter, data from Eurostat showed on Tuesday, outperforming expectations in a Reuters poll for a 0.1% drop.
• Among the biggest eurozone countries, Germany and Italy recorded negative growth rates for the quarter but France and Spain expanded, Eurostat added, based on a flash estimate that is subject to revisions. Russia's nearly year-old war in Ukraine has proved costly for the eurozone, which now spans 350 million people in 20 countries, given some members' heavy reliance on cheap energy. Surging oil and gas prices have depleted savings and held back investment while forcing the European Central Bank into unprecedented rate hikes to arrest inflation.
• But the economy has displayed some unexpected resilience, too - much like during the COVID-19 pandemic, when growth outperformed expectations as businesses adjusted faster to changed circumstances than policymakers had predicted.
• The overall picture nevertheless remains weak, with a meagre growth forecast for 2023 due to a large drop in real incomes and surging interest rates. "In the coming months, the noticeable tightening of monetary policy will increasingly slow down the economy," Commerzbank economist Christoph Weil said. "We continue to expect the euro area economy to contract slightly in the first half of the year, and the recovery expected in the second half is likely to be weak."

(Source: Reuters)