Citigroup cuts 2023 euro area real GDP growth forecast to 0.4%

They also expect the economy to shrink by 0.1% in 2024, compared to 0.8% growth expected earlier.

Citigroup downgraded its 2023 economic growth forecast for the euro area to 0.4 per cent, and said it expected the region's economy to shrink "gently" over the next three quarters.

The Wall Street brokerage had earlier forecasted that the real gross domestic product (GDP) of the euro area, which includes Germany, France, Italy and Spain among others, to grow at 0.8 per cent.

They also expect the economy to shrink by 0.1 per cent in 2024, compared to 0.8 per cent growth expected earlier.

Cyclical and structural headwinds to euro area growth are "too strong," Citigroup economists, led by Christian Schulz, said in a note dated Thursday.

Schulz added that energy transition and labour shortages, China weakness, fiscal turn and monetary tightening "overpower" the real income gains of households.