By Jan Strupczewski

BRUSSELS Euro zone economic growth will be faster than previously expected this year and next thanks to faster expansion in Italy and Spain, but inflation will also remain stubbornly high, the European Commission forecast on Monday.

In its regular economic forecast for the 20 countries that share the euro, the EU executive said gross domestic product would increase 1.1% this year and 1.6% in 2024. Last February, it forecast growth of 0.9% and 1.5% respectively.

"The EU economy is managing the adjustment to the shocks unleashed by the pandemic and Russia's aggression of Ukraine remarkably well," the Commission said.

"Last year, the EU successfully managed to largely wean itself off Russian gas. The modest growth registered in the first quarter of the year dispelled fears of a winter recession which only a few months ago appeared unavoidable," it said.

"Survey data, moreover, suggest that, though timid, the expansion is set to continue in the second quarter. The better-than-expected performance at the beginning of the year lifts the forecast for EU economic growth marginally upwards," it said.

But the faster growth, with the unemployment rate unchanged at 6.8% in 2023 and falling to 6.7% in 2024, also means that inflation would be higher at 5.8% in 2023 and 2.8% in 2024, compared to 5.6% and 2.5% respectively expected in February.

"More sustained wage increases are expected on the back of persistent tightness of labour markets, strong increases in minimum wages in several countries and, more generally, pressure from workers to recoup lost purchasing power," the Commission said.

The euro zone will see its current account surplus rise to 2.1% of GDP this year from a 0.6% surplus in 2022, and increasing further to 2.4% of GDP in 2024.

The Commission expects public finances to improve further as well, with the aggregated euro zone budget deficit shrinking to 3.2% of GDP this year from 3.6% last year and falling to 2.4% of GDP in 2024 - well below the EU ceiling of 3.0%.

Public debt will also continue to decline and is seen at 90.8% of GDP for the whole euro zone this year, down from 93.1% last year, and falling further to 89.9% in 2024, the Commission said.

(Reporting by Jan Strupczewski; editing by Philip Blenkinsop)