Storm warning over eurozone as GDP slashed

The eU has warned that a ‘ storm is possible’ as the darkening outlook prompted by the war in Ukraine saw it slash its growth predictions and ramp up inflation forecasts.

GDP in the eurozone is expected to grow by 2.6pc this year and just 1.4pc next year – down from previous estimates of 2.7pc and 2.3pc respectively – with the economic consequences of the war ‘turning grimmer’.

In contrast, the UK’s GDP is predicted to grow 3.7pc this year and 1.2pc in 2023, according to the International Monetary Fund. The forecast from the european Commission said the eU economy was ‘particularly vulnerable’ to surging energy prices due to its dependence on Russian supplies.

It came a day after IMF chief Kristalina Georgieva said in a blog post that the global outlook ‘ has darkened significantly’ as the knock-on impact of the war lifts commodity prices, exacerbating cost of living problems. She said a report later this month would further downgrade world GDP forecasts. The european Commission report said eurozone growth was expected to have slowed to a standstill in the second quarter.

But it is set to eke out 0.2pc growth in the third quarter thanks to a post-pandemic revival in holiday demand.

Inflation in the eurozone is predicted at 7.6pc for this year as a whole, up from a previously forecast 6.1pc, before falling to 4pc next year.

The commission warned that inflation could soar even further if Russia chokes off gas supplies.

But it is not forecasting a recession. eU economics commissioner Paolo Gentiloni said: ‘A storm is possible, but we are not there at the moment.’ eC vice president Valdis Dombrovskis said: ‘We are facing challenges on multiple fronts from rising energy and food prices to a highly uncertain global outlook.’