IGI Logo

The Russia-Ukraine was has forced the European Commission to slash its annual growth expectation for both the European Union (EU) and eurozone this year.

Real GDP growth in both the EU and the eurozone is now expected at 2.7 per cent in 2022 and 2.3 per cent in 2023, down from its February forecast of 4.0 per cent in 2022 and 2.8 per cent (2.7 percent in the eurozone) in 2023, Xinhua news agency quoted the Commission's Spring 2022 Economic Forecast which released on Monday.

It also increased its inflation forecast to 6.1 per cent in the eurozone in 2022 as steep increases in prices across the board continue to grow.

Inflation for the whole of the EU is expected to reach 6.8 per cent this year.

European Commissioner for Economy Paolo Gentiloni described the cut in projected growth as "one of the steepest" ever done due to higher commodity prices, including energy, which have increased further since the Russia-Ukraine war broke out on February 24.

"Both private consumption and investment are expected to be negatively affected by high inflation, uncertainty and aggravated supply bottlenecks. At the same time, consumption should continue benefitting from the post-pandemic reopening momentum, a buoyant labor market, lower accumulation of savings and fiscal measures to offset rising energy," Gentiloni told a news conference.

He said inflation has been picking up momentum since early 2021.

In the eurozone, it rose to 7.5 per cent in April, "the highest rate in the history of our monetary union".

Gentiloni warned that this forecast is however subject to high uncertainty and risks that are closely linked to the development of the conflict.

"Other scenarios are possible under which growth may be lower and inflation higher than we are projecting today," he cautioned.