The shocks triggered by the war in Ukraine will eventually bring the European economy to a standstill. The Twenty-Seven should officially enter a recession this winter. This is the content of the autumn economic forecast issued in Brussels on Friday 11 November by the European Commission. “The economy is at a turning point after a surprisingly strong first half of the yearrecalled Paolo Gentiloni, the Commissioner for the Economy. However, it lost momentum in the third quarter, and recent data point to a contraction this winter. »
In the fourth quarter, the “most EU member states” are expected to experience a drop in their GDP. And they should continue with an equally negative first quarter of 2023. Two consecutive quarters of decline that meet the technical definition of a recession. Over the whole of 2023, on the other hand, the Community executive envisages a very modest increase in European GDP, around 0.3%. In the major countries, next year, only Germany should show a drop in activity of 0.6%, while France will experience growth of 0.4%. In 2024, Europe projects growth of 1.6% for the entire continent.
Brussels notes all the same that the year 2022 was much more solid than expected. Over the current year, the growth rate should reach 3.3%, against 2.7% still envisaged a few months ago. The slowdown in activity in the third quarter to 0.2% (compared to 0.7% for the first two quarters) is largely explained by the effects of the war, in particular runaway inflation.
The war effect in Ukraine
While the strength of the economic recovery from the Covid pandemic had fueled inflation, under the double effect of massive stimulus plans and numerous supply chain disruptions, the war in Ukraine accelerated the phenomenon of price increase. For 2022, inflation is expected to stand at 9.3%, after October’s peak above 10%. According to Mr. Gentiloni, “Next year, inflation should decline moderately, around 7% for Europe, and 6.1% for the euro zone before a much more vigorous reduction in 2024.” Brussels anticipates a level of 3% (2.6% in the euro zone).
“These projections are mainly explained by significantly higher than expected wholesale gas and electricity prices in the summer, which put pressure on retail energy prices as well as on most goods. and services of the market basket »says a press release from the Commission.
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