“Eurozone avoids recession as economy expands in fourth quarter…”

The stronger-than-expected performance was in large part due to growth of 0.5% in the German economy.

Eurozone economy unexpectedly expands in Q4

The euro zone eked outgrowth in the final three months of 2022, avoiding a recession even as sky-high energy costs, waning confidence and rising interest rates took a toll on the currency bloc’s economy, data from Eurostat showed on Tuesday.

Gross domestic product in the euro zone expanded by 0.1% in the fourth quarter, outperforming expectations in a Reuters poll for a 0.1% drop. Compared to a year earlier, growth was 1.9%, above expectations of 1.8%.

Russia’s nearly year-old war in Ukraine has proved costly for the euro zone, which now spans 350 million people in 20 countries, given some members’ heavy reliance on cheap energy.

Surging oil and gas prices have depleted savings and held back investment while forcing the European Central Bank into unprecedented rate hikes to arrest inflation.

But the economy has displayed some unexpected resilience, too, much like during the COVID-19 pandemic, when growth outperformed expectations as businesses adjusted faster to changed circumstances than policymakers had predicted.

More recent figures like a crucial confidence indicator or the latest PMI data suggest that growth has hit bottom already and a slow recovery is underway, helped by a mild winter that has limited energy spending. 

With marked based energy prices hovering at pre-war levels, the International Monetary Fund upgraded its growth projection for the bloc on Monday, citing unexpected resilience, helped by generous government support.

The IMF now sees growth at 0.7% for the full year, above its 0.5% forecast of October and the 0.5% predicted by the European Central Bank in December.

UK is the only G7 country yet to regain pre-pandemic size

Three years after its departure from the European Union, Britain is yet to benefit from the Brexit dividend that was promised for its economy as it lags its peers on multiple fronts, including trade and investment.

Britain exited the EU on Jan. 31, 2020, though remained in the bloc’s single market and customs union for 11 more months.

On that day, then-Prime Minister Boris Johnson said the country could finally fulfil its potential and that he hoped it would grow in confidence with each passing month.

So far, the opposite has happened, with a range of indicators showing under-performance compared with other economies.

Opinion polls show Britons who regret leaving the EU increasingly outnumber those who do not. A survey published on Monday by news website UnHerd showed this was now the case in all but three of 632 parliamentary constituencies analysed.

The government, led by Brexit-supporting Prime Minister Rishi Sunak, says Britain is prospering with new-found freedoms.

Last week, finance minister Jeremy Hunt challenged the talk of decline and said Brexit offered a brighter future with room for measures that will attract investment in areas such as the green economy and tech.

Many economists say leaving the EU is not the sole cause of Britain’s woes – the country was hit hard by the coronavirus pandemic and the surge in gas prices after Russia’s invasion of Ukraine – but it is a factor that can help explain recent underperformance.

“It’s been more than a slow burn. It’s been a serious reduction in economic performance,” said John Springford, deputy director at the Centre for European Reform think tank.

“If you impose barriers to trade, investment and migration with your biggest trading partner (EU), then you’re going to have quite a big hit to trade volumes, and to investment and to GDP,” he said, pointing to a string of dismal economic data.

Britain was the only Group of Seven advanced economy yet to regain its pre-pandemic size of late 2019 at the end of September last year, the most recent period covered by data.

ECB to raise rates again and face questions about future path

The European Central Bank is all but certain to raise interest rates again on Thursday and pencil in more hikes for the next few months, with the only open question being how big these will be.

The ECB has been increasing rates at a record pace to fight a sudden bout of high inflation in the euro zone.

The central bank for the 20 countries that share the euro is seen raising its deposit rate by another half a percentage point to 2.5% on Thursday, in line with what it said in December.

That would take the rate the ECB pays on bank deposits to the highest level since November 2008, after a steady climb from a record low of -0.5% in July.

But ECB President Christine Lagarde is certain to face questions about smaller rises from next month, after the U.S. Federal Reserve slowed the pace of its own hikes on Wednesday and some data pointed to a bleaker outlook for the euro zone.

The Fed raised rates again and said more rate increases were needed but also acknowledged that it had turned a corner on inflation and disinflation was underway, comments that buoyed stocks.

Russian forces massing in eastern Ukraine

Russia is mustering its military might in eastern Ukraine, local officials said on Wednesday. 

Moscow has begun gathering troops in the Luhansk region of Ukraine, with Kyiv suspecting it is preparing for an offensive in the coming weeks.

Kremlin forces are removing locals living near the front line so that they can’t provide information about Russian troop deployments to Ukrainian artillery, Luhansk Governor Serhii Haidai said.

“There is an active transfer of [Russian troops] to the region and they are definitely preparing for something on the eastern front in February,” Haidai detailed. 

Military analysts anticipate a new push soon by Moscow’s forces. Late Tuesday, the US-based Institute for the Study of War said, “an imminent Russian offensive in the coming months is the most likely course of action.”

EU raises the alarm on soaring asylum requests from ‘safe’ countries

The European Union is becoming increasingly worried about the surging number of requests lodged by asylum seekers who are, in principle, ineligible for international protection, such as nationals from India, Bangladesh, Morocco, Egypt and Peru.

The European Commission estimates the number of asylum applications reached 924,000 by the end of 2022 – the highest level since 2016 – while irregular border crossings tripled year-on year to 330,000.

Notably, the asylum requests included citizens from countries considered official candidates to join the bloc, like Turkey, Albania, North Macedonia and Moldova.

The growing concern among member states came to the fore during a two-day informal meeting of interior ministers that took place in Stockholm this week.

“We have three times more asylum applications than irregular arrivals and these are overloading the reception capacities,” Ylva Johansson, European Commissioner for home affairs, said on Thursday.

“Many of these are not in need of international protection.”

‘Disclaimer: The information provided on this website is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning investments or investment decisions, or tax or legal advice. Similarly, any views or options expressed on this website are not intended and should not be construed as being investment, tax or legal advice or recommendations. Investment advice should always be based on the circumstances of the person to whom it is directed, which circumstances have not been taken into consideration by the persons expressing the views or opinions appearing on this website. Timberland Finance has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website. You should always take professional investment advice in connection with, or independently research and verify, any information that you find or views or opinions which you read on our website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Timberland Finance does not accept liability for losses suffered by persons as a result of information, views of opinions appearing on this website. This website is owned and operated by Timberland Invest Ltd.’