EU: Russia’s invasion of Ukraine could increase inflation to a record

Inflation in the Eurozone is expected to rise to a “historic value” of up to 7.6% due to Russian intervention in Ukraine, according to a European Commission forecast published on Thursday (14.07). The record-high figure, which represents the expected average rate of inflation for the year, is up 6.1% from last month’s forecast.”Russia’s war on Ukraine continues to cast a long shadow over Europe and our economy, he said. EU Commissioner for Finance, Valdis Dombrovskis.

The war has driven up food and energy prices in European countries as they try to cope with sanctions imposed on Russia and damage to key infrastructure. “Risks for forecasting economic activity and inflation are strongly linked to the developments of the war and its consequences for gas supply in Europe,” the EU statement emphasized.

Paolo Gentiloni

Economic growth in deceleration mode

Thus, the EU again lowered its forecasts for economic growth in the eurozone, referring to the consequences of Russia’s invasion of Ukraine. Referring to economic growth for the year 2023, Brussels’ forecast is now at around 1.4% from the previous estimate that predicted growth at 2.3%. “The development of the war and the uncertainty of gas supplies are unknown, so the forecast currently consists of a high degree of uncertainty and negative development,” said Economy Commissioner Paolo Gentiloni at a press conference on Thursday (14.07).

No recession is expected

Although economic growth is predicted to be slow, mainly in terms of next year, it is not expected to enter negative territory ie. to go into recession. The euro is currently on par with the US dollar, with the single European currency performing strongly against the British pound and the Japanese yen, EU officials point out.

As a result, consumption is expected to remain stable if households will use their savings for a short time. “A storm is possible, but we haven’t reached that point,” added Gentiloni./DW

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