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The European Commission has sharply reduced its forecast for Eurozone economic growth

The European Commission sharply reduced its forecast for Eurozone economic growth - Photo 1.

Euro at a bank in Heidelberg (Germany). (Photo: AFP/VNA)

On May 16, the European Commission (EC) sharply reduced its economic growth forecast for the Eurozone in 2022 to 2.7% in the context of soaring energy prices due to the impact of the pandemic. of the conflict in Ukraine.

The EC downgraded its regional economic growth forecast to 2.7% from 4% in February, shortly before Russia launched a special military operation in Ukraine. In addition, the EC forecasts economic growth Eurozone in 2023 is 2.3%, lower than the previous 2.7%.

For the entire European Union (EU), including eight non-euro countries, the EC forecasts economic growth in 2022 at 2.7%, down from 4% in the previous forecast. . This is the first comprehensive assessment of the economic costs of the impact of Russian-Ukrainian conflict to the EU economy.

In a new announcement, the EC stated that the EU economic outlook forecast made before the conflict in Ukraine broke out mentioned a long and dynamic economic development process. However, the conflict has created new challenges just as the EU is just beginning to recover from the economic impacts of the Covid-19 pandemic.

The EC assessed that the Russia-Ukraine conflict continues to escalate commodity prices, prolong supply chain disruptions and increase instability, and exacerbate already existing obstacles to economic growth. before.

Not only lowering its growth forecast, the EC also raised the eurozone’s 2022 inflation forecast to 6.1%, much higher than the previous 3.5% forecast. Inflation in the Eurozone in 2023 is forecast to drop to 2.7% but still higher than the 2% target set by the European Central Bank (ECB). Previously, the EC forecast inflationary in 2023 is 1.7%.

Although governments increase spending to offset the increase energy prices and supporting millions of people to evacuate from Ukraine, the EC forecasts that the euro area’s public budget deficit will shrink from 4.7% in 2021 to 3.6% of GDP in 2022.

This is attributed to governments that have stopped supporting measures to overcome difficulties due to the Covid-19 pandemic. The eurozone public budget deficit in 2023 is forecast at 2.5%.

Despite slowing economic growth, the unemployment rate in the Eurozone is forecast to fall to 7.3% in 2022 and 7% in 2023, significantly lower than 7.7% in 2021.

EC Vice President Valdis Dombrovskis said that the EU economy is going through a challenging period due to the impact of the conflict in Ukraine and therefore the EC has lowered its forecast for economic growth in the region.

The EC warned that the conflict situation is still unpredictable and the risk of stagflation (inflation and recession) is present. If Russia cuts off all oil and gas supplies to Europe, the EC warns that the forecast will be cut even deeper.

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