Brussels, 16 May 2022 (TDI): The European Commission released the Spring 2022 Economic Forecast highlighting the economic impact of the war in Ukraine on the EU.
Despite the EU recovering from the economic impacts of the pandemic, the Russian invasion of Ukraine has brought new challenges.
There is no doubt that the EU economy is going through a challenging period due to Russia’s war against Ukraine.
Uncertainty and risks to the outlook will remain high as long as Russia’s aggression continues.#ECForecast
— European Commission 🇪🇺 (@EU_Commission) May 16, 2022
Slowdown in growth, inflation, Government deficits, risks, and uncertainty
According to the Spring 2022 Economic Forecast, Russian invasion has put the EU’s economic resilience to the test.
The pressure exerted on commodity prices and increasing uncertainty, has led to the revision of EU’s growth outlook downwards and the forecast for inflation upwards.
In addition to this, the GDP of the EU is estimated to stay in positive territory. This is because of the combined effect of strong policy undertaken to support growth during the pandemic and post-lock down re-openings.
For example, the post-pandemic opening of contact-intensive services again and a strong improving labor market. In addition to this, the real GDP growth in the EU and the Euro area is currently expected at 2.7% in 2022.
Whereas it is expected at 2.3% in 2023, down from 4.0% and 2.8% (2.7% in the euro area), in a relative manner, within the Winter 2022 interim Forecast.
More to this, energy commodity prices have hit both the global and EU economies. Despite that, before the war, they already had increased substantially, still uncertainty on supply chains pressured prices to rise.
Furthermore, the aggregate government deficit within the EU is expected to decline further in 2022 and 2023 since temporary COVID-19 support measures continue being withdrawn.
In addition to potential interruptions in energy supply, additional increases in non-energy commodity prices, particularly food will have more impact.
That is, it could result in additional upward pressures on prices and downward pressures on growth. The risks to the forecast for activity economically and inflation depend mainly on the evolution of the war and particularly on its effects on energy markets.
In conclusion, the invasion by Russia has led to an economic estrangement from Russia because of the sanctions by the EU that will cause difficult consequences.
