Economic growth in the eurozone will be slightly faster than earlier expected this year and the next, the European Union's executive body said Monday, after dodging a winter recession that was feared amid an energy crisis, but stubbornly high inflation is likely to keep hurting the economy by sapping people's ability to spend.

The outlook for the 20 countries using the euro currency improved to growth of 1.1% this year from 0.9% in February's predictions, the European Commission said in its spring forecast Monday, thanks to faster expansion in Italy and Spain.

Europe had faced expectations of a winter energy catastrophe after Russia cut off most of its supply of natural gas to the continent amid the war in Ukraine. Prices surged to record highs for gas needed to heat homes, generate electricity and power factories – fueling painful spikes in consumer prices.

A mad scramble to line up new sources of natural gas – through more expensive supplies of liquefied gas coming by ship – along with mild weather and reduced use helped Europe get through the winter without a major energy crisis.

"The European economy continues to show resilience in a challenging global context," European Commissioner for Economy Paolo Gentiloni said at a news conference. "Declining energy prices, diversification of energy supply and reduced consumption have contained the adverse economic impact of Russia's war of aggression against Ukraine."

"As lower energy prices continue to provide relief to households and firms' budgets, the economic expansion is expected to continue in 2023 and pick up some pace in 2024," he added.

The growth forecast for next year was raised to 1.6% from 1.5% in the earlier projection.

"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," the commission 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 upward," it added.

Officials cautioned, however, that inflation is persistently high, which erodes people’s purchasing power and weighs on growth. Consumer prices rose 7% in April from a year earlier, while the economy barely scraped out a 0.1% expansion in the first three months of the year.

There are also challenges from rising interest rates that the European Central Bank (ECB) is using to try to return inflation to the bank's target of 2%.

Higher borrowing costs for consumers and businesses have been reducing the availability of loans for home purchases or business investment and shrinking demand for loans.

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 labor markets, strong increases in minimum wages in several countries and, more generally, pressure from workers to recoup lost purchasing power," the commission said.

An additional challenge comes from recent turmoil mostly affecting banks in the United States, where three financial institutions have collapsed in recent months.

While European officials say their banks are not directly exposed to the U.S. troubles, increased scrutiny of bank finances from regulators and shareholders may make banks even more reluctant to lend.

Banks are the chief sources of financing for companies in Europe, in contrast to the U.S., where financial markets supply the bulk of credit.

The eurozone will see its current account surplus rise to 2.1% of gross domestic product (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 eurozone 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%.

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