The 20-nation eurozone has narrowly avoided recession after the region’s economy flatlined at the end of 2023, official figures show.

Zero growth in the single currency zone in the final quarter of last year followed a 0.1% economic contraction in the third quarter, meaning that recession – defined as two consecutive quarters of contraction – was just averted. Economists polled by Reuters had expected the eurozone’s economy to shrink by 0.1% in the fourth quarter.

The eurozone’s two biggest economies both performed poorly in late 2023, with Germany contracting by 0.3% and France posting no growth for a second successive quarter, according to Eurostat, the EU’s statistical agency.

There was better news from the other two members of the eurozone’s “big four”. Italy, which had been expected to stagnate, recorded growth of 0.2%, while Spain expanded by 0.6% – three times the 0.2% forecast.

Of the smaller eurozone economies, Portugal grew by 0.8% in the final quarter, Austria expanded by 0.2%, while Ireland’s economy contracted by 0.7% – its fourth successive quarterly fall in 2023.

Eurostat said that the broader 27-nation European Union also posted no growth in the fourth quarter. From the fourth quarter of 2022 and the final quarter of 2023, the eurozone expanded by just 0.1%, while the EU grew by 0.2%.

“The eurozone economy escaped recession by the skin of its teeth by the end of 2023,” Diego Iscaro, head of Europe economics at S&P Global Market Intelligence, said. “The outlook for 2024 continues to be challenging amid faltering demand and increasing geopolitical tensions.”

The eurozone’s stagnating economy will further pressurethe European Central Bank, which sets interest rates for the countries in the monetary union, to start cutting borrowing costs.

Bert Colijn, a senior economist at ING bank, said: “A technical recession has just been avoided in the eurozone. Still, the eurozone economy has now been broadly stagnating since late 2022 and has lost substantial ground to the US in terms of GDP in recent years. After the buoyant post-pandemic reopening phase, the economy has now entered a phase of prolonged weakness.”

Since Russia’s invasion of Ukraine almost two years ago, the eurozone has been struggling to cope with higher energy and food prices, and the damage caused to business and consumer confidence. The ECB raised interest rates last year to their highest level since the euro was launched in 1999.

Nicola Mai, economist at asset manager Pimco, said: “Despite a resilient early start in 2023, the eurozone economy was weak through much of the year, and we anticipate that this fragility will persist in 2024.

“The reasons for this ongoing weakness are clear. Europe is still recovering from a lingering energy shock and has not experienced the same degree of fiscal stimulus as the more resilient US economy in recent years. The region’s shorter debt maturities also mean that interest rate hikes have been felt more quickly.”