Eurozone economy slips surprisingly into recession

The economy in the euro zone surprisingly recorded a decline in the first quarter and thus slipped into a technical recession. The statistics office Eurostat announced that economic output fell by 0.1 percent compared with the previous quarter. This development contradicts earlier estimates, which had forecast slight growth.

Technical recession occurs when gross domestic product (GDP) shrinks in two consecutive quarters. Although this decline is relatively small, as slight growth of 0.1 percent was previously expected, economists predicted stagnation.

In the fourth quarter of the previous year, the eurozone economy had already contracted by 0.1 percent as well. The current data refer to the 20 countries of the euro zone, including the recent accession of Croatia.

Compared with a year earlier, the eurozone economy posted revised growth of 1.0 percent from January to March. The previous estimate was 1.3 percent, while economists expected a revision to 1.2 percent.

The individual eurozone countries showed different developments. Luxembourg and Portugal recorded the strongest growth in the first quarter, with 2.0 percent and 1.6 percent quarter-on-quarter, respectively. By contrast, sharp declines were registered in Ireland, with a minus of 4.6 percent, and in Lithuania, with a minus of 2.1 percent. Germany also recorded a decline in gross domestic product of 0.3 percent.

These data raise questions about the economic stability and future prospects of the euro zone. The euro zone will now have to focus on taking measures to revive growth and lead the economy out of recession.