Forecast: Inflation in euro countries 2022 higher than expected

Created: 2/10/2022Updated: 2/10/2022 12:31 p.m

According to a forecast by the EU Commission, inflation in the euro area will be significantly higher this year than previously expected.

© Christophe Gateau/dpa

Consumers have to adjust to higher prices longer than expected.

The Omicron wave continues to affect the European economy.

The situation in Ukraine also harbors risks.

Brussels - According to a forecast by the EU Commission, inflation in the euro area will be significantly higher than previously expected.

This year, inflation is expected to peak at 3.5 percent on an annualized basis, according to the agency's winter forecast on Thursday.

In the autumn forecast, the Commission had assumed 2.2 percent.

The EU economic forecast for 2022 was lowered to 4 percent, compared to the 4.3 percent predicted in the autumn.

In 2023, growth in the EU is expected to drop to 2.8 percent, slightly more than previously expected.

According to estimates, the euro zone economy will grow by 4 percent this year and 2.7 percent next year.

The forecast for the growth of the German economy was also corrected significantly downwards in the wake of the Omicron wave.

"Significant increases in inflation and energy prices, together with tightening in supply chains and labor markets, are holding back growth," said EU Economy Commissioner Valdis Dombrovskis, according to the statement.

Later in the year, however, the economy will shift into gear again when some of the bottlenecks are eased.

According to the forecast, an inflation rate of 1.7 percent is expected in the euro zone in the coming year, again below the 2 percent target of the European Central Bank.

Across the EU, inflation is estimated to reach 3.9 percent this year and fall to 1.9 percent in 2023.

Inflation has remained at a comparatively high level for months, mainly due to energy prices.

The ECB has not changed its monetary policy despite the rise in inflation.

Bundesbank President Joachim Nagel, who has a say in monetary policy in the Governing Council of the ECB, had recently called for a quick response from monetary authorities if inflation did not fall by March.

3.6 percent growth expected for Germany

According to the Commission, the German economy will grow by 3.6 percent this year, while 4.6 percent was previously expected.

Corona infections rose, cases of illness weighed on the labor market and exports suffered from supply chain bottlenecks, the forecast said.

However, record orders and good business sentiment showed there could be a rebound later in the year once shortages eased, Economy Commissioner Paolo Gentiloni said.

For the coming year, the Commission expects Europe's largest economy to grow by 2.6 percent - more than previously assumed.

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The Commission warned that the pandemic is still having a major impact on the European economy, with the current wave of infections likely to have a short-lived impact.

If price hikes widen, inflation could be even higher than expected, Gentiloni warned.

The Commission also cited "geopolitical tensions in Eastern Europe" as risks to economic growth and inflation.

"Peace, stability and economic growth are of course closely linked," Gentiloni said, referring to the Russian troop deployment near the Ukrainian border.

dpa