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European Commission: economic forecasts at half mast

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In the big game of economic forecasts, the European Commission is revising its figures. In mid-May, it was counting on a growth of the members of the Union at 2.7% for 2022; 2.3% for 2023 with inflation contained at 6.8%. “We had identified risks in our last forecast and many have materialized”underlined Paolo Gentiloni, the Commissioner for the Economy, in his introductory remarks to the presentation this Thursday, July 14 of the summer forecasts of the Brussels institution.

Three shocks

The energy shock was bigger than expected, with Europeans being heavily exposed to the energy crisis caused by the conflict in Ukraine. Financing conditions at the global level have tightened: in question, in particular, the rise in rates by the American Central Bank, the Fed. “Global monetary policies are normalizing faster than expected”, summed up Paolo Gentiloni. More generally, the global economy is taking a hit, which is weighing on the European Union’s external demand.

Growth in 2022 is not however revised downwards because other elements have come to its rescue. The commodity price boom has subsided: food and metal prices have fallen from record lows following the invasion of Ukraine, although they remain well above levels a year ago. one year old. The price of a barrel of oil calmed down a little, tempered by sluggish global demand. At the European level, economic results beyond expectations at the start of the year and optimistic forecasts for the tourist season act as doping agents.

Inflation revised upwards

The year 2023 promises to be difficult, however. The European Commission expects growth of 1.5% in the Union, a drop of 0.8 points compared to its spring calculations. Inflation has been revised sharply upwards: 8.3% over the year, ie 1.5 points more than in the previous forecast. The return to normal, with inflation at 3%, is scheduled for the end of 2023, “as pressures on energy prices and supply chains ease”believes the institution.

As in its May forecasts, the Commission points out the risks likely to draw these forecasts ” on the decline “. Russian gas will be the main object of attention, while the Nord Stream gas pipeline, essential for European supply, is currently under maintenance and doubts hang over its return to service at the end of operations.

“Further gas supply cuts will only drive up prices and amplify stagflationary pressures (weak growth combined with a high level of inflation, editor’s note), alerted Paolo Gentiloni. In the spring, we predicted that a Russian gas cut would cause a recession in Europe. This risk is no longer hypothetical. The storm is possible. »

Source: www.la-croix.com

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