(CercleFinance.com) – Capital Economics says it expects the euro zone to soon fall into recession ‘as high inflation, tighter monetary policy and weak global growth wreak havoc’.
The analyst firm predicts GDP will stagnate in the third quarter and contract over the following two quarters before starting to recover, but only by 0.5% in 2023 and 1.8% in 2024, much less than the latest consensus.
‘The rebound will be held back by a lack of political support,’ he said, also seeing downside risks to his forecast, ‘particularly if Russia completely shuts off the gas taps or the ECB fails to avoid a sovereign debt crisis’.
“The ECB could raise interest rates much further than expected and may not be able to agree on when to use the transmission protection mechanism”, warns Capital Economics.
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