Brussels: Russia’s war against Ukraine continues to negatively affect the EU economy, setting it on a path of lower growth and higher inflation compared to the Spring Forecast, according to the Summer 2022 EU Economic Forecast released by the European Commission Thursday.
The forecast projects that the EU economy will grow by 2.7 percent in 2022 and drop to 1.5 percent in 2023.
Growth in the euro area is expected at 2.6 percent in 2022, and fall to 1.4 percent in 2023.
Annual average inflation is projected to peak at historical highs in 2022, at 7.6 percent in the euro area and 8.3% in the EU, before easing in 2023 to 4.0 percent and 4.6 percent, respectively.
The EU economy remains particularly vulnerable to developments in energy markets due to its high reliance on Russian fossil fuels, it says.
The forecast, however, noted that risks to the forecast for economic activity and inflation are heavily dependent on the evolution of the war in Ukraine and in particular, its implications for gas supply deliveries to Europe.
Paolo Gentiloni, EU Commissioner for Economy, told a press conference in Brussels presenting the forecast that “Russia’s unprovoked invasion of Ukraine continues to send shockwaves through the global economy.
Moscow’s actions are disrupting energy and grain supplies, pushing up prices and weakening confidence.
He said the “Brent crude oil price hit a peak in mid-June, but retrenched thereafter amidst growing evidence of slowing global demand.
The oil futures curve that underpins this forecast points to only slightly higher prices over the forecast horizon compared to spring.” Economic activity in the remainder of the year in the 27-member bloc is expected to be subdued, notwithstanding a promising summer tourism season, he noted.