The European Union warned that Eurozone was all set to fall into recession as the European Union increased inflation forecasts for 2022 and 2023 on the back of high energy prices. Europe is also reeling from the economic shockwaves caused by the Russia and Ukraine war that have fuelled a spike in energy costs, and hit consumers across Europe.
The European Commission has increased uncertainty, and the prices are expected to put the Eurozone and the majority of the European Union member nations into recession in the last quarter of 2022. The contraction of economic activity will continue in the first quarter of 2023, and growth is also expected to return to Europe, the European Commission said.
According to the European Commission, with powerful headwinds still affecting demand, economic activity in European Union is set to be subdued, with the growth of GDP reaching 0.3 percent in 2023. The European Commission has predicted that Germany, the biggest economy in Europe, would fare the worst of the member countries with a contraction of 0.6 percent in 2023.
The forecast comes as the European Commission sharply increased its prediction for inflation in 2022 and 2023. According to the forecast, inflation in the Eurozone was also expected to stand at 8.5 percent for 2022, and 6.1 percent in 2023, over two points higher than predicted earlier.
Paolo Gentiloni, the European Union’s economy commissioner, said that the impact of the increasing energy prices, inflation, is now taking its toll, and they also have some difficult months ahead of them. Paolo Gentiloni added that there was the potential for future economic disruptions because of Russia Ukraine war.