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Euro zone: inflation forecast revised upwards for 2022, to 3.5%

2022-02-10T11:00:18.909Z


Soaring energy prices also prompted the European Commission to revise its growth forecast down to 4%.


Brussels on Thursday revised its inflation forecast for the euro zone for 2022 upwards to 3.5% and downwards its forecast for economic growth to 4%, due to soaring energy prices. .

The European Commission has so far forecast inflation of 2.2% and gross domestic product (GDP) growth of 4.3% for this year.

Energy prices are expected to remain high for longer than expected, dragging the economy down for longer and leading to higher inflationary pressures

,” the Commission said in a statement.

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After being hit in 2020 by the effects of the Covid pandemic, European economic activity rebounded strongly from the spring of 2021. But it has suffered a marked slowdown since the end of the year, under the effect not only of the rise in energy prices, but also a resurgence of contamination, with the Delta then Omicron variants, and disruptions in supply chains in industry.

This situation is weighing on growth at the start of 2022, but "

the headwinds should gradually fade

", according to the European Commissioner for the Economy, Paolo Gentiloni.

We expect an acceleration of growth from the spring.

Price pressures are expected to remain strong until the summer, after which inflation is expected to decline

,” he said.

Deeming the economic fundamentals "

solid

" in Europe, the Commission has revised its growth forecast for 2023 upwards to 2.7% (against 2.4%) in the 19 countries sharing the single currency.

Regarding the rise in prices, the European executive expects a “

peak inflation

” at a “

record rate

” of 4.8% in the first quarter of 2022, before a decline in the second half of the year.

Inflation should still remain above 3% (up over one year) in the third quarter, then drop to 2.1% between October and December.

Uncertainties “remain high”

The European statistics office published a record inflation rate of 5.1% over one year in January, well above the 2% target of the European Central Bank (ECB).

Brussels predicts that inflation will fall below this target only "

in the course of next year

", expecting 1.7% for 2023.

The rise in prices represents a headache for many modest households who are struggling to make ends meet, but also for the ECB which finds itself under pressure to raise its interest rates in order to contain inflationary pressures at the risk of breaking the growth.

The uncertainties surrounding the economic forecasts “

remain high

”, underlined Paolo Gentiloni.

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In particular, inflation could rise more than expected if price increases feed through to wages, further increasing business costs.

Geopolitical tensions around Ukraine are another significant risk.

Russia is indeed by far Europe's largest supplier of gas and a military confrontation with Moscow could propel energy prices to all-time highs.

Source: lefigaro

All business articles on 2022-02-10

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