Weaker growth levels in EU to continue in 2024
European Commission revises growth projections
The European Commission has revised its economic growth projections for the eurozone, forecasting a deceleration to 0.8 percent in the current year and an increase to 1.3 percent in 2024. This represents a downward adjustment of 0.3 percentage points when compared to the estimates made in May.
The EU executive attributed this slowdown to factors including reduced consumption, stricter lending conditions imposed by banks due to elevated interest rates, the economic deceleration in China, and the consequent decline in exports, collectively contributing to a slowdown in economic activity within the euro area. The Commission said that the weaker growth momentum in the continent is expected to roll over to next year, with the impact of high interest rates set to continue restraining economic activity. However, a mild rebound in growth is projected next year, as inflation keeps easing, the labour market remains robust, and real incomes gradually recover.
Survey indicators currently indicate a deceleration in economic activity during the summer and in the upcoming months. This slowdown is evident in both the industrial sector, which remains weak, and the services sector, where momentum is waning, despite a robust tourism season in various European regions.
New EU initiatives for SMEs launched
The European Commission has presented a series of initiatives aimed at addressing the needs of Europe’s SMEs within the context of the prevailing economic environment. Small firms constitute 99 per cent of Europe’s businesses and are seen to play a crucial role in driving Europe’s green and digital transitions. However, they have faced instability and unpredictability due to recent crises.
In this context, the SME Relief Communication outlines new measures designed to offer short-term relief, enhance the long-term competitiveness of SMEs, and promote fairness in the Single Market’s business landscape.
This package includes proposals for a Regulation on late payments in commercial transactions and a Directive establishing a Head Office Tax System for SMEs. These measures form part of a broader effort to improve SMEs’ access to financing, enhance the business environment and support their growth towards becoming mid-cap companies.
Notably, the Regulation aims to combat late payments in commercial transactions, addressing a detrimental practice that adversely affects SMEs’ cash flow and disrupts supply chain resilience. This proposal introduced stricter payment deadlines and sought to resolve legal gaps found in the existing Directive. The revised text ensured automatic payments of accumulated interest and compensation fees, alongside new enforcement and redress mechanisms to safeguard businesses from non-compliant payers.