In this article, we will be taking a look at the 20 largest economies in Europe. To skip our detailed analysis, you can go directly to see the 5 largest economies in Europe.
Europe has long since considered to be the most advanced continent in the world, experiencing decades of stable growth and a high standard of living. In the past three decades, according to data from the IMF, the average annual growth rate for the continent has been 1.8%. However, Europe's famous stability took a heavy hit first in 2020 when the Covid-19 pandemic hit, with Europe becoming the epicenter of the global pandemic, even as most countries there saw their healthcare systems overwhelmed. The development of the vaccine saw the pandemic subside in early 2022, and just when it looked like Europe would see high growth and an attempt to return to pre-pandemic levels, the Russian invasion of Ukraine occurred. The invasion began towards the end of February 2022, with its ramifications still taking time to be felt over the continent, resulting in a strong first half in 2022, led by the largest economies in Europe.
However, the latter half saw the full impact of the war being realized, as global demand was dented while inflation, which was already continuing to ramp up even before the war began, ramped up to record levels. One of the biggest concerns faced by Europe was an energy crisis after Russia refused to supply gas to some countries such as Poland because of their refusal to pay in rubles. As a result, energy prices skyrocketed which have resulted in record profits for several of the biggest oil companies in the world, including Shell plc (NYSE:SHEL), Exxon Mobil Corporation (NYSE:XOM) and BP p.l.c. (NYSE:BP). As a result, Europe implemented a windfall tax on such companies, to collect more in taxes from extra profits earned as a result of the energy crisis, which has been challenged in court by some of these companies.
According to the European Economic Forecast by the European Commission, growth in the European Union (EU) 2023 is expected to be 0.8% while in 2024, it's expected to reach 1.6%. Meanwhile, inflation, which averaged around 9.2% in the EU is expected to decline significantly to 6.4% in 2023 and then to 2.8% in 2024. These positive forecasts are a result of positive news emerging in the last quarter of 2022, as gas benchmark pricing fell to below war levels as gas demand continued to fall and diversification of supply was successfully carried out. While the initial expectation had been a 0.5% contraction in the last quarter of 2022, the economy broadly stagnated while the labor markets have continued to perform strongly as well. All of this has meant that even though a recession was expected for the EU, it looks to have narrowly avoided it, though some of the largest economies in Europe are still likely to face one.
Of course, that doesn't mean that Europe won't face any challenges in 2023; global economic headwinds are still something that the continent has to grapple with, and higher energy costs are set to impact businesses further, reducing their margins. However, for those looking to invest in European stocks, Lazard Asset Management states that global headwinds seem to be baked more into European prices, which means that even if a recession occurs, it is likely to exit it first as compared to other developed markets' stock exchanges. Meanwhile, European bonds were repriced in 2022, providing a potentially exciting asset class with a low entry point.
The largest economies in Europe are also dominant among the countries with the highest GDP in 2022. These nations have a combined GDP of over $22 trillion, which interestingly enough, is still lower than the GDP of the U.S. alone, though a lot of these countries' GDP per capita is still much better than the U.S.! These countries are generally counted among those with the highest quality of life thanks to the way their economies operate. We excluded Turkiye from our list as the majority of the country is located in Asia, with a small part in Europe. To determine our list, we found out the 2022 GDP of each country from the International Monetary Fund's databank. So, let's now take a look at the countries that have made Europe one of the best places to live in, starting with:
Total GDP of the country in 2022 (in billions): $222
Despite a rebound in tourism after restrictions were lifted in 2022, Greece is still facing economic headwinds but despite these issues, its economic growth is expected to exceed the Eurozone average in 2023.
Total GDP of the country in 2022 (in billions): $256
Portugal's real GDP growth in 2022 was a strong 6.7%, but will be just 1% in 2023, as the Russian war on Ukraine, increased energy prices and supply chain issues have all negatively impacted the country's economy.
Total GDP of the country in 2022 (in billions): $281
Nordic countries may constitute some of the largest economies in Europe, but their economic performance in 2023 isn't expected to light up the continent, and Finland is another Nordic country which is facing a recession in 2023 but will recover to a growth of 1.1% in 2024.
Total GDP of the country in 2022 (in billions): $296
The Czech Republic will see a major decline in inflation, from 14.8% in 2022, to 9.3% in 2023. However, its economic growth is expected to be just 0.1% in 2023 with investment growth considered to be the main driver in its 2023 economic projection and performance.
Total GDP of the country in 2022 (in billions): $300
Romania posted a strong recovery from the Covid-19 pandemic in early 2022 even as double-digit inflation persists in the country.
Total GDP of the country in 2022 (in billions): $387
Denmark received a "Stable" outlook from Fitch, with Denmark being among the largest economies in Europe which will just avoid a technical recession with the OECD projecting a growth rate of 0.1% in 2023, while inflation will fall from 8% in 2022 to under 3% in 2024.
Total GDP of the country in 2022 (in billions): $468
According to the OECD, Austria had a healthy growth rate of 4.5% in 2022, while inflation is also expected to remain high during this time period. It is also expected to narrowly avoid a recession in 2023, with growth rate projections ranging from 0.1% to 0.5%.
Total GDP of the country in 2022 (in billions): $505
Norway's economy derives its vast wealth primarily from oil, with one of its largest companies being Equinor ASA (NYSE:EQNR). While Norway's economic growth is expected to be just 0.7% in 2023, it will improve to 1.4% in 2024.
Total GDP of the country in 2022 (in billions): $520
The Irish economy is expected to register one of the highest growth rates in Europe in 2023 at 4.9%, cementing its place as one of the largest economies in Europe. Meanwhile, growth in 2024 is expected to be another healthy 4.1% as inflation continues to fall in Ireland where the multinational sector increased employment by 9% in 2022. Many multinationals continue to incorporate in Ireland to take advantage of the tax laws of the country, and you can learn more by visiting the 10 biggest Irish companies.
Total GDP of the country in 2022 (in billions): $589
Recently, Fitch revised its outlook for Belgium to "negative", while affirming its rating at "AA-" as a result of its wealthy and diversified economy.
Total GDP of the country in 2022 (in billions): $604
The largest economy in the Nordics, Sweden's finance minister has stated that the country has entered a recession in 2023, which is expected to only end in 2024 while headline inflation is also expected to increase in 2023 as compared to 2022.
Total GDP of the country in 2022 (in billions): $716
Poland was one of the worst-impacted countries by the Russia Ukraine war, not just because of energy prices but also due to receiving the largest influx of Ukrainian refugees, with Anadolu Agency stating that more than 9 million refugees have crossed into Poland since the start of the war, though a large percentage has also moved to other countries. However, it had one of the highest inflation rates among EU countries at 13.2% in 2022, which is expected to remain at 11.7% in 2023, before falling to 4.4% in 2024.
Total GDP of the country in 2022 (in billions): $807
Banking and finance is the biggest industry in Switzerland, not surprising for a country which is popular for the secrecy surrounding its banking industry. In Q4 2022, the Swiss economy remained stagnant and is expected to grow slowly in 2023 at a rate of 1%.
Total GDP of the country in 2022 (in billions): $991
Information technology, chemicals, high-tech systems and energy are some of the biggest industries in the Netherlands, which is also one of the smallest countries in our list with a population of just 17.5 million people. According to the OECD, inflation peaked in Q4 2022 at 15.4% and by 2024, is expected to fall down to 3.9%.
Total GDP of the country in 2022 (in billions): $1,390
Spain is expected to reap benefits of a stronger than expected carryover from 2022, as its GDP growth forecast is 1.4%. A strong rebound in tourism as restrictions were lifted combined with higher private consumption allowed Spain to weather the shocks from the Russia Ukraine war relatively well.
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Disclosure: None. 20 largest economies in Europe is originally published at Insider Monkey.
