The European Central Bank lowered its forecast for GDP growth in the eurozone in 2022 by 0.5%, while raising its inflation forecast by almost 2% due to the economic impact of the war in Ukraine.
This war “will have a significant impact on economic activity and inflation, with rising energy and commodity prices, disrupting international trade and confidence,” ECB President Christine Lagarde said.
Risks to the eurozone economy “have increased significantly” due to the conflict, he added.
ECB experts expect GDP to increase by 3.7% this year, compared to 4.2% in the latest projections, while price increases would reach 5.1%, compared to 3.2% forecast so far.
“The eurozone economy is still expected to grow strongly in 2022, but at a slower pace than was expected before the war started,” Lagarde said.
Energy prices, which soared 31.7% in February, continue to drive inflation, according to the institution.
Energy “remains the main reason for this high rate of inflation and is driving up prices in many other sectors,” Lagarde said.
Prices, already affected by the high demand after the pandemic and the lack of supply, are now being pressured upwards by the war in Ukraine because Russia is one of the main energy suppliers of the European Union.