EU cuts growth forecasts
The European Commission has cut its economic growth forecasts for 2022, after the year got off to a weaker-than-expected start.
The Commission now expects the European Union and Eurozone to both grow by 4.0% in 2022, and by 2.8% and 2.7% respectively in 2023. Last autumn it predicted the Eurozone and wider bloc would grow by 4.3% in 2022.
The EU’s economy grew by 5.3% in 2021.
Publishing its winter economic forecast, the Commission said: "The EU economy entered the new year on a weaker note than previously projected. Having regained the pre-pandemic output level in summer last year, a moderate slowdown was already expected in the autumn forecast.
"However, since then headwinds to growth have intensified."
In particular, the Commission pointed to the rapid spread of Omicron - which caused "renewed strains on healthcare systems and unprecedented surge of absences from work" - alongside "persistent logistic and supply bottlenecks". Surging energy prices, which are "now set to remain high for longer", were also cited as a headwind.
Stronger-than-anticipated inflationary pressures were also weighing on households’ purchasing power, it added.
The Commission now expects inflation to hit 3.9% in the EU this year, and to reach 3.5% in the Eurozone, before easing back to less than 2% in 2023.
"Inflation projections have been revised up, as energy prices are now set to remain high for longer and price pressure are broadening to several categories of goods and services," it said.
However, longer-term it struck a more upbeat note: "Looking beyond this short-term turbulence, a continuously improving labour market, large accumulated savings, still favourable financing conditions and the full deployment of the recovery and resilience facility are all set to support a prolonged and robust expansionary phase."