After a prolonged period of stagnation, the EU economy is expected to rebound in 2024. According to EU projections by national IFIs, the EU’s real GDP is set to grow by 1.1 % in 2024 on average, compared with 0.4 % in 2023. Geopolitical tensions could disrupt supply chains and increase prices, affecting trade and investment. Elections in several EU countries may lead to policy uncertainty and affect public finances. Government deficits in some EU countries might exceed 3% of GDP.

According to EU national independent fiscal institutions’ (IFIs) projections, the EU’s real GDP growth is expected to gain some momentum in 2024 while inflation is set to decrease further. The recovery however will be moderate and highly uncertain. Growth in 2024 is forecast to be 1.4 % on average, compared to 0.6 % in 2023, according to IFIs and governments estimates.

2023 began with a slowdown of the EU economy while the second half of the year seems to be setting itself up for a slow but steady recovery from the pandemic’s devastating effects, the Russian invasion of Ukraine and the subsequent energy price rises. Combined with the ongoing winding-down of supply-side pressure and the widespread and coordinated tightening of monetary policy by most EU central banks, inflation has declined from its previous record highs.

With the rapid increase in consumer prices, the macroeconomic outlook remains uncertain. According to IFIs’ projections, 2022 saw positive dynamics for the EU's real GDP growth at around 3 % on average . Nevertheless, growth is expected to be lower in 2023 at 1 % on average.

The paper finds that overall EU IFIs appear to have good capacity to carry out a wide range of tasks and play an enhanced role, but there is some scope to ensure that all institutions are able to perform in line with EU peers in all areas. 

While 2022 began with the continued economic recovery from the Covid-19 crisis, Russia’s invasion of Ukraine has contributed to a sharp increase in global energy and food prices. Combined with ongoing supply-side pressures, this has led to a rapid re-evaluation of the economic outlook and associated risks, a shift in monetary policy stance, significant corrections in financial markets, and new measures by governments to manage the increases in the cost-of-living. This EFM provides an overview of the activities of 30 national IFIs, and the fiscal measures adopted in response to rising inflation in 25 EU Member States and the United Kingdom.

As the EU enters the third year of the COVID-19 pandemic, the future macroeconomic outlook remains unusually uncertain due to the emergence of new variants. A strong economic recovery was reported in 2021 (5% on average), which is expected to continue in 2022 but at a slightly slower pace (4% on average). The fiscal stance in most countries remained very supportive throughout 2021, as governments continued with large-scale measures to support the economy. In the 25 countries covered by this European Fiscal Monitor (EFM), policy measures cost on average about 5% of GDP in 2020 and 4% of GDP in 2021.

As vaccines are rolled out and restrictions relaxed, European economies are recovering from the Covid-19 pandemic. Nevertheless, most recent projections for 2021 are less optimistic than earlier estimates, given the further intense disruption caused by Covid-19 early this year. Both the projected real GDP growth and public balances were revised downwards by on average 1 percentage point.

Twelve months after the start of the first Covid-19 lockdowns, European economies remain severely affected. This EFM gives an overview of the activities of 32 IFIs, and fiscal measures adopted in 26 EU member states and the UK. The monitor is based on a survey among EU IFIs conducted in January and February 2021, and is largely based on information in autumn 2020 government budgets.

This issue of the European Fiscal Monitor gives an overview of the activities of EU IFIs and fiscal measures adopted in the 24 EU member states and the UK up to September 2020.

Read the Special edition of Fiscal Monitor when facing Covid-19.

Read the Special edition of Fiscal Monitor when facing Covid-19.