EU cuts economic forecasts and pledges to fight inflation | News | DW

European Union finance ministers from countries using the euro – collectively known as the Eurogroup – said on Monday tackling inflation was their number one priority.

The news came as the European Commission, the executive arm of the EU, revised its economic forecasts, citing rising inflation, falling growth and growing geopolitical and natural disruptions to businesses as the biggest brakes on the economy as a whole.

“What we see is that economic growth is proving to be quite resilient this year. Still, we can expect a downward revision and even more for next year due to many uncertainties and risks” , said Valdis Dombrovskis, Executive Vice-President of the European Union. Commission for an Economy at the Service of Citizens, speaking in Brussels.

Moreover, suggested Dombrovskis, “inflation is going to be revised upwards.”

Economy Commissioner Paolo Gentiloni has issued a new warning, saying the risk continues to rise in the face of Russian gas supply cuts. “We are headed for rough waters,” he said, alluding to “very limited, reduced and slowed economic growth” due to the deepening energy crisis caused by the Russian invasion of Israel. Ukraine.

“What we’re seeing is these high energy prices trickling down to the rest of the economy and inflation taking root and becoming widespread,” Dombrovskis warned.

Gentiloni said Brussels has many options to fight inflation, including gas imports and price caps.

Other financial institutions, such as the International Monetary Fund (IMF), have also warned of the impact of the war in Ukraine on eurozone economies.

EU economic forecast darkens as inflation climbs

The European Commission had originally forecast economic growth of 4.0% for the year, it is expected to peg that figure at 2.7% when it unveils this year’s forecast on Thursday. Forecasts for next year look even bleaker – originally set at 2.7%, they have now been revised down to 2.3%.

Annual inflation, which had been estimated at 3.5%, instead climbed to 6.1%, and monthly inflation for June hit a whopping 8.6%.

The focus on inflation clearly signals a move away from the massive stimulus programs that defined the height of the coronavirus pandemic. Despite fears of an economic contraction, the European Central Bank (ECB), for example, is expected to raise interest rates for the first time in 11 years on July 21.

The release of the report on Thursday also comes as EU governments begin budget negotiations for the 2023 financial year. Belgian Finance Minister Vincent Van Peteghem said this should translate into fiscal prudence, including cuts budgetary and structural reforms.

js/fb (AFP, Reuters)