The European zone recorded growth in the last three months of 2022, managing to avoid a recession despite high energy costs, declining confidence and rising interest rates affecting the economy that are likely to continue into the year.
European gross domestic product grew by a meager 0.1% in the fourth quarter, data from Eurostat showed on Tuesday, beating expectations in a Reuters poll for a 0.1% decline. Compared to the previous year, growth was 1.9%, just beating expectations of 1.8%.
Among the largest euro zone countries, Germany and Italy recorded negative growth rates for the quarter, although France and Spain also recorded expansion, Eurostat added, based on flash estimates that are subject to revision.
Russia's nearly year-long war in Ukraine has proven costly for the European zone, which now includes 350 million people in 20 countries, given the heavy reliance of some members on cheap energy.
Rising oil and gas prices have depleted savings and held back investment, while forcing the European Central Bank to make unprecedented rate hikes to curb inflation.
But the economy has also shown unexpected resilience, with growth exceeding expectations as businesses adapt more quickly to changing conditions than policymakers predicted.
More recent figures such as key confidence indicators or the latest PMI data suggest growth may have bottomed out and a slow recovery is underway, aided by generous government support and a mild winter that has limited energy spending.
The overall picture however remains subdued, with modest growth projected for 2023 due to a large fall in real incomes and a jump in interest rates.
The ECB has raised rates by a combined 2.5 percentage points to 2% since July to tame inflation, and markets see another 1.5 percentage point hike by mid-year, which would put deposit rates at their highest level since the turn of the century.
