Belgium (Brussels Morning Newspaper) The European Commission announced on Thursday that economic growth within the eurozone will likely be slower than earlier estimates predicted, due to a combination of a new wave of coronavirus infections, rising energy prices and continued supply-side disruptions, coupled with higher inflation than expected.
The EC forecast gross domestic product in the 19 eurozone countries will grow 4% in 2022, dropping to 2.7% in the next year. Last November, the Commission’s regular economic forecast predicted a 4.3% growth this year, and 2.4% next year.
The most recent revision of the eurozone growth forecast is much closer to the latest predictions by the International Monetary Fund (IMF), which projected a 3.9% growth in the eurozone this year, to be followed by a 2.5% growth in 2023.
“Multiple headwinds have chilled Europe’s economy this winter: the swift spread of Omicron, a further rise in inflation driven by soaring energy prices and persistent supply-chain disruptions,” Commissioner Paolo Gentiloni, who is in charge of the bloc’s economy, declared. “With these headwinds expected to fade progressively, we project growth to pick up speed again already this spring.”
Meanwhile, the eurozone continues to be burdened by high inflation rates. The latest Commission forecast expects annual inflation to reach 3.5% this year, significantly higher than the European Central Bank (ECB) target of 2%. Previously, the Commission expected inflation to go no higher than 2.2% in 2022. The latest prediction is even higher than ECB’s own pessimistic outlook, which was published in December and predicted 3.2% inflation for this year.
The Commission continues to believe that inflation will subside in the following year, dropping down to 1.7% in 2023, echoing IMF’s predictions for the eurozone in the next year.
“Price pressures are likely to remain strong until the summer, after which inflation is projected to decline as growth in energy prices moderates and supply bottlenecks ease. However, uncertainty and risks remain high”, Gentiloni observed.
