The eurozone will enter a recession at the end of 2022 and will register high inflation in 2023: CE

The euro zone will close this year recession and will register a still high inflation in 2023, in a scenario marked by an “exceptional degree” of uncertainty, the European Commission anticipated this Friday in its economic forecasts for the autumn of the boreal.

According to the Commission, due to a “weaker external environment and tighter financial conditions”, the European Union (EU), the euro area and most member states will enter a recession in the last quarter of the year.

The Commission — the EU’s executive arm — said that after a solid performance in the first half of this year, the bloc’s economy “has entered a much more challenging phase.”

The European bloc is severely affected by its “geographical proximity” to the armed conflict in Ukraine, and its “heavy dependence on gas imports from Russia.”

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The report forecasts that the contraction in economic activity “will continue in the first quarter of 2023But growth will probably return to Europe in the spring, the text says.

However, he pointed out that “powerful headwinds” that slow down demand will make this resumption of economic activity very moderate.

By 2023, the Commission now projects economic growth of just 0.3 percent. In his previous report, published in July, he had forecast a 1.5 percent advance.

In October, the European Central Bank had warned that a recession in the bloc was imminent.

persistent inflation

This scenario is aggravated by the persistence of high inflation.

The Commission projected that the euro zone will see only a relative improvement but that inflation will remain markedly high in the coming year.

The trajectory of inflation will be at 6.1%, according to the Commission, an upward readjustment of more than two percentage points in relation to the July forecasts (4%).

The Commission stressed that this economic outlook remains “surrounded by an exceptional degree of uncertainty” as a result of Russia’s offensive against Ukraine.

The biggest threat comes from the adverse evolution of the gas market and the risk of shortages, especially in the winter of 2023-24,” he said.

For the European Commissioner for the Economy, Paolo Gentiloni, “the EU economy is at a turning point.” “We have a tough few months ahead of us,” he added.

The Italian official recalled that in the first quarter of 2022 the EU economy grew 0.7%, a performance that was repeated in the second quarter to slow down to 0.2% in the third.

However, he added, the driving force behind the post-pandemic economic recovery “has largely faded”, while the effects of the war in Ukraine and “a broad slowdown in external demand” have become decisive.

Among the main economies of the EU, the Commission projected for Germany a growth of just 1.6% in 2022, which for France would be 2.6% and for Italy 3.8 percent. Spain, meanwhile, should show 4.5 percent.

Meanwhile, the inflation rate would close 2022 in Germany at 8.8%, with 8.5% in Spain, 5.8% in France and 8.7% in Italy.

The Commission report points out that this scenario of imminent recession and high inflation coincides with very good indicators of employment levels.