Brussels, July 14 (BNA) The European Commission lowered its forecast for economic growth in the eurozone for this year and next and revised its inflation estimates on Thursday.
In its quarterly forecast, Brussels confirmed its more pessimistic forecast, which it already discussed with eurozone finance ministers on Monday.
The EU executive now expects 2.6% growth this year for the 19-nation currency bloc, just below the 2.7% it forecast in May, Reuters reports.
But next year, when the impact of the Ukraine war and higher energy prices can be felt more sharply, growth is now expected to be 1.4%, instead of the previously estimated 2.3%.
For the broader European Union’s 27 nations, growth forecasts are unchanged at 2.7% this year, but revised downward to 1.5% in 2023 from 2.3%.
In a significant change, the Commission also raised its estimate of inflation in the eurozone, which is now expected to peak this year at 7.6% before declining to 4.0% in 2023.
The Commission had forecast in May that prices in the euro area would rise by 6.1 percent this year and 2.7 percent in 2023.
Brussels has warned that headline inflation could rise further if gas prices rise due to Russia’s cutting off of supplies, which could lead to a further downward revision to growth.
The risks to the outlook from the re-emergence of the COVID-19 pandemic also cannot be ruled out.
Despite these high risks, the Commission stressed that the eurozone is not expected to slip into recession and that the outlook could also improve if recent declines in oil and commodity prices persist.
Thanks to a strong labor market with historically low unemployment rates, the commission said private consumption could also prove more resilient to price increases if households were to use more of their accumulated savings.
Germany, the EU’s largest economy, will see growth slow to 1.4% this year and 1.3% in 2023. The Commission in May forecast expansions of 1.6% and 2.4%, respectively.
France is expected to grow by 2.4% this year, instead of the previous forecast of 3.1%. Next year, growth is expected to slow further to 1.4%, versus the 1.8% forecast in May.
Of the three largest economies in the bloc, only Italy is expected to grow this year by more than previous forecasts. It is now expected to expand by 2.9%, instead of the 2.4% estimated in May.
However, the country is expected to see a marked slowdown next year, with growth expected at 0.9%, lower than other large economies and down from the previous forecast of 1.9%.