The war in Ukraine and the confinements in China penalize the growth of the European Union and fuel a strong prices push.
A few months ago, economists feared a new wave of COVID-19. It was the war in Ukraine, triggered on February 24, which came upset their forecasts. Monday, May 16, the European Commission presented its new projections, which sketch a significantly less optimistic scenario. From now on, it relies on an increase in gross domestic product (GDP) of 2.7 % in 2022 and 2.3 % in 2023 within the European Union (EU) as well as the euro zone. In February, during its last forecasts, it anticipated growth of 4 % in 2022 and 2.8 % (2.7 % for the euro zone) the following year.
The twenty-seven continue to garner the fruits of the post-Cavid recovery and the European recovery plan of 750 billion euros. But the situation changed dramatically compared to the winter of 2021. On November 11, Paolo Gentiloni, the economy commissioner, called “extraordinary” the prospects of the European economy, adding that such a situation “does not would not represent itself anytime soon, perhaps never for [his] generation “and inciting the member states of the Union to take advantage of it to reform. Putin’s assault, beyond the ravages she causes in Ukraine, showed her hopes.
Furthermore, the confinements that multiply in China in the face of the resurgence of the pandemic, in particular in Shanghai, accentuate the difficulties of supply of industry and weigh on world trade. For Germany, which maintained significant economic links with Russia, it is double penalty: it should experience growth of 1.6 % in 2022 and 2.4 % in 2023. France, whose activity Depends less on its exchanges with the outside and more in domestic consumption, is doing better in the short term (3.1 % in 2022), but not beyond (1.8 % in 2023).
The job market should resist bad winds
While energy prices had already jumped with postpandemia recovery, the war has crossed a new course and the inflation thrust that follows should settle longer than expected. Especially since the conflict in Ukraine increased the supply breaks from which European industry was already suffering before February 24 and has given birth to tensions on the food markets. In this context, the Commission is now counting on an increase in prices in the euro zone of 6.1 % (6.8 % within the EU) in 2022 – with a peak at 6.9 % in the second quarter – and 2.7 % (3.2 % within the EU) in 2023.
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