Eurozone growth gets downgraded

Frankfurt (Feb 10)  There have been comments from the European Commission this morning. It noted that Eurozone economic growth will be slower than earlier expected this year because of a new wave of COVID-19 infections, high energy prices, and continued supply-side disruptions. EU executive arm said gross domestic product in the 19 countries sharing the euro would grow 4.0% this year and 2.7% in 2023. In comparison, the number are lower to November, when the Commission forecast 4.3% growth in 2022 and 2.4% in 2023 and is close to the latest view of the International Monetary Fund, which expects growth of 3.9% this year and 2.5% in 2023. European Economic Commissioner Paolo Gentiloni said "Multiple headwinds have chilled Europe's economy this winter: the swift spread of Omicron, a further rise in inflation driven by soaring energy prices and persistent supply-chain disruptions," He added, "With these headwinds expected to fade progressively, we project growth to pick up speed again already this spring." The Commission expects inflation this year will be 3.5%, well above the European Central Bank's target of 2.0%, and much higher than its own forecast from November of 2.2%. This is also a more pessimistic forecast than that of the ECB from December, when the bank projected inflation at 3.2% this year. The money markets have now started pricing in hikes from the ECB as at the last meeting there was a slightly more hawkish tilt. Some ECB governing council members are even looking for a hike this year. Speaking on inflation Gentiloni said "Price pressures are likely to remain strong until the summer, after which inflation is projected to decline as growth in energy prices moderates and supply bottlenecks ease. However, uncertainty and risks remain high,".

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