After a moderate slowdown triggered by the exponential spread of the Omicron variant and the persistent logistic and supply bottlenecks, the euro area economic recovery is set to regain momentum in the second quarter and remain strong over the forecast horizon, the European Commission said Thursday.<\/p>\n
According to the Winter Interim Forecast, the currency bloc entered the 2022 on a weaker note. At 4.0 percent, the projected GDP growth rate for 2022 was slower than the 4.3 percent estimated previously and 5.3 percent in 2021.<\/p>\n
In 2023, growth is expected to moderate further to 2.7 percent in a movement towards ‘normalcy’. Nonetheless, the 2023 outlook was revised up from 2.4 percent.<\/p>\n
On inflation front, the EU said consumer price inflation is projected to peak at 4.8 percent in the first quarter of 2022 and remain above 3 percent until the third quarter. <\/p>\n
It is expected to decline markedly in the final quarter of the year and settle at below 2 percent next year as the pressures from supply constraints and energy prices fade. <\/p>\n
Citing sustained rise in energy prices, the overall inflation forecast for this year was raised to 3.5 percent from 2.2 percent and the outlook for 2023 to 1.7 percent from 1.4 percent.<\/p>\n
The balance of risks to the growth outlook is broadly even. The EU cautioned that the current wave of infections could have a longer lasting economic impact than assumed, bringing fresh disruptions to critical supply chains.<\/p>\n
Risks to the growth and inflation outlook are aggravated by geopolitical tensions in Eastern Europe, the agency said. <\/p>\n
The significant rise in inflation and energy prices, along with supply chain and labor market bottlenecks, are holding back growth, Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People said.<\/p>\n
“Looking ahead, however, we expect to switch back into high gear later this year as some of these bottlenecks ease. The EU’s fundamentals remain strong and will be boosted further as countries start to put their Recovery and Resilience Plans into full effect,” added Dombrovskis.<\/p>\n
Germany’s real GDP is forecast to expand 3.6 percent in 2022, implying a return to its pre-crisis level in the course of the year. In 2023, GDP is expected to continue growing by 2.6 percent as restraints on pent-up consumer and investment demand dissipate. <\/p>\n
Inflation is expected to accelerate to 3.7 percent this year. Strong aggregate demand, and the tight labor market are expected to keep inflation above 2 percent in 2023.<\/p>\n
Spain’s real GDP is expected to expand 5.6 percent in 2022 and 4.4 percent in 2023. The gap with Spain’s pre-pandemic GDP level is now projected to be closed by the fourth quarter of 2022. <\/p>\n
Annual HICP inflation is forecast to increase from 3.0 percent in 2021 to 3.6 percent in 2022, and then to ease to 1.1 percent in 2023.<\/p>\n
France’s GDP is forecast to expand by 3.6 percent in 2022 and 2.1 percent in 2023. Overall, HICP is forecast to increase by 2.8 percent this year and 1.7 percent in 2023.<\/p>\n
After expanding 6.5 percent in 2021, Italy’s real GDP growth is expected to average 4.1 percent in 2022 and 2.3 percent in 2023. Inflation is set to rise to 3.8 percent this year, before falling back to 1.6 percent next year. <\/p>\n