DUBLIN: The European Commission has been forced to cut growth forecasts due to rising inflation, but has ruled out the possibility of a recession in Europe. The International Monetary Fund has also warned that the war in Ukraine will seriously affect the European economic growth.
In May, the Commission predicted a slowdown in EU economic growth. It was predicted that growth will slow down to 2.7 percent in 2022 and 2.3 percent in 2023, down from a forecast of 4.0 percent and 2.8 percent just months earlier.
Meanwhile, inflation in the Eurozone has hit a new record. Inflation has reached 8.6%, defying all expectations of a reduction in price hike. This is much higher than what the Commission had earlier predicted. In May, inflation in the eurozone was estimated at 6.1 percent in 2022 and 2.7 percent in 2023.
The European Central Bank is set to raise interest rates for the first time in 11 years to curb inflation. There were worries in some corners that this would lead to economic contraction.
“What we are seeing is that these continued high energy prices are trickling down to the rest of the economy and inflation is getting more entrenched and more widespread,” EU executive vice president Valdis Dombrovskis said.
“What we see is that economic growth is proving quite resilient this year. Still, one can expect some downward revision and even more so for the next year because of many uncertainties and risks,” he added.