Eurozone Economy Shrinks For First Time Since 2022

(RTTNews) - The euro area economy contracted for the first time in more than three years in the first quarter, in contrast to the earlier estimates, dragged down by the massive slump in Ireland, official data revealed Friday.

Gross domestic product shrank 0.2 percent on a quarterly basis, offsetting the 0.2 percent growth seen in the fourth quarter, latest data from the statistical office Eurostat showed. This was the first decline since the fourth quarter of 2022.

The initial estimate showed that the single currency bloc had expanded 0.1 percent in the first quarter.

The drastic revision to the earlier estimate for Eurozone output was mainly due to the 12.1 percent decline in Ireland's GDP compared to the initial estimate of a 2.0 percent fall.

On a yearly basis, economic growth for the first quarter was revised down sharply to 0.3 percent from 0.8 percent. The growth followed fourth quarter's 1.2 percent expansion.

The expenditure-side breakdown of GDP showed that household spending grew 0.2 percent sequentially and government consumption advanced 0.5 percent. Household and government spending contributed 0.1 percentage points to GDP growth.

Meanwhile, gross fixed capital formation dropped 0.3 percent, marking the first fall in three quarters. Gross fixed capital formation provided a negative contribution of 0.1 percentage point.

At the same time, exports dropped 0.2 percent, while imports grew 0.5 percent. As a result, net foreign trade contributed negative 0.1 percentage points.

Finally, changes in inventories contributed negative 0.1 percentage points, data showed.

Last month, the European Commission downgraded Eurozone economic growth forecast for this year to 0.9 percent from 1.2 percent, citing the unprecedented disruption to global energy markets due to the conflict in the Middle East. The projection for 2027 was trimmed to 1.2 percent from 1.4 percent.

This week, the OECD projected the euro area economic growth to ease to 0.8 percent in 2026 before picking up to 1.2 percent in 2027 as domestic demand and trade growth strengthen.

Eurostat data showed that employment in the currency bloc grew only 0.1 percent in the first quarter, following a 0.2 percent rise in the fourth quarter. The annual growth in employment eased to 0.5 percent from 0.7 percent.