Forecasts for the economy of the European Union before the outbreak of the war in Ukraine spoke of a stable development and expansion. But the Russian aggression has highlighted new challenges, at a time when the EU was trying to recover from the COVID-19 pandemic.
Facing mounting pressure in terms of commodity prices that continue to rise, causing supply concerns and uncertainty, the war is exacerbating an existing dire situation that is expected to escalate. Such a thing forces the European Commission to once again look at the expectations regarding the economic development in the Eurozone, but also the forecasts for the increase in inflation.
The Gross Domestic Product of the European Union is expected to remain in positive territory in the future, thanks to the combination of the reopening of countries after the pandemic and the strong policies undertaken to support the economy during and after the pandemic.
Intensive contact services have reopened after the pandemic, strengthening the labor market; but also the reduction of savings accumulation or fiscal measures to better cope with high energy prices in favor of the private consumer. Investments will be the first to benefit from the fund for recovery from the pandemic but also from the implementation of the reform agenda.
GDP growth in the EU and the euro area is expected to be 2.7 percent in 2022 and 2.3 percent in 2023. The downgrade for 2022 should be read against the backdrop of the economy’s rapid growth in the spring and summer of last year, which adds about 2 percentage points to the annual growth rate for this year. Production growth within the year decreased from 2.1 percent to 0.8 percent.
The main blow to the global and EU economies comes from rising commodity and energy prices. Although they had risen significantly before the war, as a result of the pandemic, uncertainty about supply chains has caused prices to rise further. This is proven mainly for food products and other basic goods and services, while in parallel with this, there is a decrease in the purchasing power of families.
Logistics and supply chain disruptions caused by the war, as well as rising input costs for a wide range of raw materials, add to worries in world trade caused by drastic COVID-19 containment measures that are still in place in part of China, weighing on production.
Source: Telegrafi Portal
