European GDP Shrinks More Than Expected

The Euro region, comprising 17 countries (E17), has reported a GDP fall of 0.3% in the first quarter of the CY2013. The E-27 region has also reported a fall of 0.1%. On a YoY basis, the fall is 1.1% and 0.7% respectively for E-17 and E-27 region showing that the region is far from the growth at the moment. Even the recovery is bumpy and prolonged in the region.

Only a handful of countries like Bulgaria, Germany, Latvia, Lithuania, Hungary, Poland, Romania, Slovakia, Sweden and UK have reported a sequential positive growth while the rest have reported a drop. Amongst these countries, Luxembourg has reported highest drop of 1.6% in the GDP while Cyprus has reported a drop of 1.4% in the GDP.

On a YoY basis, Greece remains the worst affected economy as it has reported a drop of 5.6%, highest in this region. Portugal and Cyprus have also reported very high levels of GDP contraction in the region. Latvia and Lithuania are the 2 countries which have continued to grow at rates of 6% and 4.1% respectively.

When exactly will the European economy show growth? There were high expectations from Europe to do well in 2013 but the GDP data indicates otherwise. The European Central Bank has once again left the rates unchanged due to the sluggish growth in the region.

Recession in the Euro area is the main concern as the unemployment rate in the E-17 area stood at 12.2% in May 2013, against 12.1% in April 2013. The EU-27 unemployment rate in May 2013 remained elevated at 11%. The consumer sales data also shows that the investor confidence remains badly impacted due to the recessionary scenario. The second half of the year will provide some cues regarding growth in 2014. For 2013, however, we don’t expect any positive sign.