EU Commission slashes GDP growth forecasts, blames war, says worse possible

By Alexander Bueso

Date: Monday 16 May 2022

EU Commission slashes GDP growth forecasts, blames war, says worse possible

(Sharecast News) - Brussels axed its short-term growth forecasts for both the European Union and the single currency area, not least as a result of the energy price shock triggered by the war in Ukraine.
The conflict had also led to other logistics and supply chain disruptions, as well rising prices for a broad range of war materials, to which one had to add the "drastic" Covid-19 containment measures imposed in China, which were weighing on global trade and Chinese production.

In its Spring growth forecasts, the European Commission also warned that under a severe scenario, in which natural gas supplies from Russia were seriously restricted, the bloc's rate of expansion in 2022 would be whittled down to just 0.2% while consumer price inflation would exceed 9.0%.

EU commissioner for trade, Valdis Dombrovskis, said: "While growth will continue this year and next, it will be much more subdued than previously expected. Uncertainty and risks to the outlook will remain high as long as Russia's aggression continues."

Under its base scenario, the EU's executive arm new forecasts were for the bloc's and the euro area's gross domestic product to both grow by 2.7% and 2.3% in 2022 and 2023, respectively.

Previously, it had anticipated GDP growth of 4.0% in 2022 for both, of 2.8% for the EU in 2023 and of 2.7% for the euro area.

Consumer price inflation in the euro area meanwhile was seen reaching 6.1% for 2022 (Previous: 3.5%), before slowing to 2.7% in 2023.

Unemployment was nonetheless still seen falling across both the EU and in the single currency bloc during those two years.

As a proportion of GDP, and despite the measures taken to mitigate high energy quotes and to support refugees from Ukraine, the aggregate EU deficit was seen falling from 4.1% in 2021 to 3.6% in 2022 and 2.5% in 2023, the Commission said.

The deficit in the euro area was seen shrinking to 3.7% and 2.5% in 2022-23.

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