Euro area 2024 outlook : growth resumes as past shocks fade –structural challenges remain

After stagnating throughout 2023 , we expect growth in the euro area to reaccelerate in 2024 , as the dampening impact from past shocks fades out. The main channel through which this is already manifest ing itself is the big decline in inflation and the rise in real income, that , in turn, will spur consumer spending. The outlook for investment spending is more mixed. After strong growth in the early post-pandemic phase , corporate investment spending has been flat for several quarters on the back of a decline in corporate profit growth. But wage moderation, solid balance sheets , as well as investments related to the Green Transition should reignite investment spending next year . Although we see the euro area gain momentum , it continues to face structural challenges that are limiting the upside potential of the recovery . In particular high energy prices will weigh on the euro area’s potential growth rate. Thus, we expect growth to accelerate further only moderately in 2025, mostly on the back of the easing of monetary policy, which we expect to start in June 2024.