EU Lowers Eurozone Economic Growth Forecast Amid "Rising Inflation Concerns"

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] The European Union (EU) Commission announced that it will lower its economic growth forecast for this year. This is interpreted as taking into account the overlapping adverse factors such as the prolonged impact of COVID-19 and intensified inflation. In particular, concerns are growing that the sharp rise in energy prices following the Ukraine crisis will exert significant pressure on the economy.

On the 10th (local time), the EU Commission revised down the real gross domestic product (GDP) growth forecast for the Eurozone, the countries using the euro within the EU, to 4.0% year-on-year in its '2022 Winter (Interim) Economic Forecast' released that day. The previous forecast announced in November last year was 4.3%. However, the forecast for next year was revised upward from 2.4% to 2.8%.

The main reason for the downward revision of the economic growth rate is interpreted as intensified inflation. The EU Commission revised its inflation forecast for this year to 3.5% for the Eurozone and 3.9% for the EU. This is a significant upward revision compared to the November forecast of 2.2% for the Eurozone and 2.5% for the EU. In particular, it is pointed out that the surge in energy prices such as natural gas due to the Ukraine crisis is exacerbating inflation.

The EU Commission warned that factors suppressing economic growth, such as COVID-19 and the rapid increase in infections, high energy prices, and ongoing supply chain issues, have intensified, causing the slowdown in growth momentum to be steeper than expected, and that inflation could continue until summer.

Paolo Gentiloni, EU Commissioner for Economy, said, "Various headwinds such as the rapid spread of the Omicron variant, additional inflation increases due to soaring energy prices, and ongoing supply chain disruptions have made the European economy cold this winter," adding, "Inflation is expected to remain strong until summer, after which energy prices will stabilize and supply chain issues will be resolved, leading to a decline in prices."

This content was produced with the assistance of AI translation services.