(Reuters) – Goldman Sachs expects economic growth in the euro area to recover to 1.25%-1.5% in 2024, more than double their forecast of about 0.5% for this year’s growth.
The brokerage’s 2023 forecast for the euro area is also sharply below their 2.2% forecast for the U.S.
However, with the U.S. seen maintaining a growth rate of 2% in 2024, Goldman sees a cyclical re-convergence in growth between the two regions, as they expect several headwinds for the euro area to fade, including drags from energy prices and credit.
GS’s 2024 forecast is double HSBC’s expectation of a 0.5% growth for the euro zone.
GS, however, flags fiscal policy risks.
“Fiscal policy poses the main risk to Europe’s growth catch-up in 2024… rising long-term interest rates and slowing nominal growth point to risks that a sharper fiscal adjustment might be required, especially in Italy,” said Goldman Sachs economists led by Sven Jari Stehn in a note dated Oct. 5.
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(Reporting by Reshma Rockie George in Bengaluru; Editing by Janane Venkatraman)