While uncertainties about the outlook remain in a context of high inflation, the consequences of the Russian war in Ukraine and three years of the COVID-19 pandemic, China’s economic reopening and the resilience of the labour market in advanced economies have improved the economic outlook in the short term.
Thus, global growth forecasts currently stand at 2.8% for 2023 and 3.0% for 2024.
For the eurozone, the unexpected resilience of economic activity also led to a slight improvement in the outlook. In this context, growth in the eurozone was revised upwards for 2023 with growth of +0.8% in 2023 and +1.0% in 2024. By country, Spain’s GDP is expected to increase by +1.8% in 2023 and by +1.3% in 2024, followed by the Netherlands (+1.5% and +1.1%), Italy (+0.8% and +0.9%), France (+0.5% and +0.8%), Belgium (0.5% and +1.1%) and Germany (+0.3% and +0.8%).
While rate hikes by major central banks stressed financial markets in March 2023, the peak of inflation in the eurozone is expected to be reached and a slowdown is expected for the second half of the year. In early May 2023, the ECB again raised key interest rates by 25 bp to curb inflation. This policy seems to be bearing fruit since the deceleration has been strong within the eurozone. Indeed, the CPI rose from +8.3% in February to +6.9% in March. Current forecasts show inflation still high for the whole of 2023 (+5.2%), but much lower than in 2022 (+8.4%). As a result, the ECB is expected to intervene twice more in June and July 2023, but in a rather moderate way compared to 2022. In 2024 and 2025, with the gradual impact of the tightening of monetary policy, inflation should continue to decline and return to its target of 2%.
If the 10-year rate hike has led to a rise in the cost of credit, central banks could be close to the peak and end their drastic monetary tightening policy. The FED may be the first major central bank to end its rate hike policy soon. According to the consensus, the ECB would have a terminal rate of 3.75% in July 2023 if inflation comes under control and could start a bearish cycle between the end of 2023 or during the year 2024.
Sources of data: CBRE, Eurostat, IMF, RCA, Oxford Economics..
The team
With a university education in local economic development, Daniel While began his career as business establishment consultant to local authorities. In 2006, he joined the Institut de l’Epargne immobilière et Foncière as analyst, and specialised in the world of unlisted real estate funds (SCPIs and OPCIs for France).
He is co-author of the book Les OPCI published by Delmas (September 2008). He joined Primonial REIM in 2017, where he held the position of Development Director, then Research & Strategy Director from 2019.
Henry-Aurélien Natter joined Primonial REIM as Research Manager in January 2018. He has the mission of developing the analyses of the Research & Strategy Department on the real estate markets, the economy and capital in France and in Europe.
Henry-Aurélien Natter began his career at Les Echos Etudes (formerly Eurostaf), then at C&W (formerly DTZ), and lastly at BNP PRE, where he acquired solid and varied experience in real estate research, strategy and finance. He is qualified with an AES degree in Business Management, a Masters Decree in management and SME management, and an International Master in commerce and marketing.
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