“The risk of a recession is increasing.” This was acknowledged by European Commissioner for Economy Paolo Gentiloni on Wednesday. He warns of what could potentially become “one of the hardest winters in generations.”
“A number of warning lights are on the red: energy prices have broken new records, inflation continues to rise and economic confidence is deteriorating. And the Russian war continues,” Gentiloni described the economic situation during a speech at think tank Bruegel in Brussels.
Evolution of the energy markets
Gas prices were fifteen times higher at the end of August than before the corona pandemic, and twice as high as at the beginning of this summer. “The prospects depend mainly on the evolution of the energy markets: they would clearly deteriorate compared to our reference scenario in the event of a complete interruption of the Russian gas supply,” warned Gentiloni. Energy also continues to be the driver of inflation, which is now around 9.1 percent in the eurozone.
The Commission has had to adjust economic growth expectations for the eurozone before. In mid-July, she predicted that the eurozone economy would grow by 2.6 percent this year, and by just 1.4 percent in 2023. In May, the Commission had forecast 2.7 and 2.3 percent respectively.
Not all doom and gloom
However, it is not all doom and gloom, according to Gentiloni. With 0.8 and 0.7 percent growth, the eurozone economy performed better than expected in the first two quarters of this year and unemployment rates remain at historic lows. In addition, oil and food prices are on the decline and supply chain problems are receding. “These developments will ease inflationary pressures, so inflation may have peaked,” he concluded.
Also watch: Paul D’Hoore – “We will feel inflation in everything”
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