GDP and employment have grown in the European Union in 2022. However, the overall picture still worries economists.
GDP measures for the European Union regarding the fiscal year 2022 are finally out. They paint a conservatively positive picture, with the war in Ukraine having a smaller impact than previously thought.
According to the data released on Wednesday by Eurostat, GDP increased by 3.5% in 2022 as a whole in the European Union. In 2021, GDP had increased by 5.4%, finishing the post-Covid rebound and finally getting to pre-pandemic levels.
This growth shows that the European Union still rejects the idea of a recession, which many posit it will come in 2023. The Russian invasion of Ukraine triggered a major energy crisis which, the data shows, has not hit as hard as initially thought.
The best performing country in the EU has been Greece, with a 1.4% growth in Q4 compared to the last quarter. On the other side of the spectrum, Poland is the worst performing economy, with a -2.4% decrease for the same measure.
Finally, the data also shows an improvement in employment, which went up 2% in the EU and 2.3% in the Eurozone in 2022.
A possible recession
However, the picture is not overwhelmingly positive either. In the last quarter of 2022, growth pretty much stalled, sitting at 0% for the Eurozone and -0.1% in the EU.
Furthermore, when compared to the United States, the data truly shows the extent of the war’s impact. In the last quarter, the United States managed to grow by 2.9%, rebounding from the crisis that gripped them at the start of the year.
This shows their advantage on being further away from the conflict, as well as being far less reliant on Russian oil and gas.
The fact that Poland, Estonia and Finland are the EU’s worst performing countries is not a coincidence. They all border Russia directly and all relied on Russian fossil fuels. With the war, they joined the European sanctions against Moscow, who then cut off Eastern Europe from their oil and gas supplies.
Further, inflation still grips the European economy and prevents it from growing. In February, inflation is expected to decrease to 8.5%, down just 0.1% from January.
With high inflation, the European Central Bank is forced to raise interest rates, therefore slowing down the economy even further.
Though a recession is still not guaranteed to happen, it is unfortunately very likely, especially as the war keeps going and inflation is still high.
