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The European Fee on Monday lowered the eurozone progress forecast for 2022 right down to 2.7% from a earlier estimate of 4%.
The EU mentioned rising vitality and commodity costs have “exacerbated pre-existing headwinds” to progress.
The Russian invasion is “weighing on Europe’s financial restoration” from the worldwide pandemic, EU Economic system Commissioner Paolo Gentiloni mentioned.
What’s inflicting the slowdown?
Earlier than the outbreak of the Ukraine warfare, the outlook for the EU economic system was for “extended and sturdy growth,” the Fee mentioned in a press launch.
“Struggle-induced logistics and provide chain disruptions, in addition to rising enter prices for a broad array of uncooked supplies,” are weighing on manufacturing, the Fee mentioned.
It additionally cited the drastic COVID-19 containment measures in China as an element disturbing world provide chains.
The EU predicts that vitality price-driven inflation within the eurozone will exceed 6% in 2022, peaking at 6.9% within the second quarter. The EU expects inflation to subside within the eurozone in 2023 to 2.7%.
Some silver linings for Europe’s economic system?
The Fee mentioned that top progress in 2021 as coronavirus restrictions had been lifted ought to dampen the worst results of this yr’s decrease prognosis.
“Final yr’s sturdy financial rebound could have a lingering optimistic impact on progress charges this yr,” mentioned Gentiloni
“A robust labor market, post-pandemic reopening…ought to present additional assist to our economies and assist to drive public debt and deficits decrease,” he added.
Employment within the EU is projected to develop by 1.2% this yr, the Fee mentioned.
European Commissioner for Commerce, Valdis Dombrovskis, mentioned the EU’s financial fundamentals are “stable.”
“Earlier than this warfare began, the EU economic system had launched into a path of sturdy restoration and progress. Extra jobs are being created within the EU economic system, attracting extra individuals into the labor market and retaining unemployment low,” he mentioned.
In offering its forecast, the Fee has admitted it’s at the moment tough to precisely asses financial progress as financial exercise and inflation are “closely depending on the evolution of the warfare, and particularly on its affect on vitality markets.”
wmr/kb (AFP dpa)
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