EU cut eurozone growth outlook, sees higher inflation amid Ukraine war

The European Commission slashed the EU’s growth outlook for 2022 and 2023, and revised up the inflation forecast in the midst of Russia’s war against Ukraine, which poses new challenges to the bloc economy.

Despite a rough start to the year, the outlook for the EU economy has shown a prolonged and robust expansion after almost two years from the beginning of the Covid-19 pandemic. However, the outbreak of the war in eastern Europe has changed the scenario by bringing further disruptions in global supply, fueling further commodity price pressures, and exacerbating uncertainty.

The Commission has revised its inflation forecast for 2022 upwards from 6.1% to 7.6%, reflecting the recent increase in the cost of living. It also predicts inflation of 4% for next year, up from May’s forecast of 2.7%, per a draft from the European Union’s executive team, according to Bloomberg. There will be an official release of the Commission’s projections this coming Thursday.

Inflation for the year was predicted at 6.1% in May, a significant increase from the 3.5% predicted before the invasion of Ukraine.

Additionally, the European Commission anticipates GDP to grow by 2.6% this year, down from its May estimation of 2.7%, and by 1.4% in 2023, Bloomberg reported.