European Commission predicts record inflation levels for Europe

The surge in energy and commodity prices will slash euro zone economic growth this year and next, while boosting inflation to record levels, the European Commission forecast on Monday.

The Commission cut its growth forecast for the 19 countries sharing the euro to 2.7% this year from 4.0% predicted only in February, shortly before the war in Ukraine started. Growth is to slow to 2.3% next year, also below the 2.7% seen before.

Inflation, which the European Central Bank wants to keep at 2.0% will be 6.1% this year, the Commission forecast and fall only to 2.7% next year. Earlier, the Commission expected prices to grow 3.5% in 2022 and 1.7% in 2023.

Still, the aggregate EU government deficit should fall in 2022 to 3.6% of GDP from 4.7% in 2021 as temporary COVID-19 support measures are withdrawn. It should fall to 2.5% in 2023, the Commission said.

In the euro zone, the aggregate deficit is to halve to 3.7% this year against 2021 and fall further to 2.5% next year while aggregated euro zone public debt is to fall to 94.7% of GDP from 97.4% in 2021 and ease further to 92.7% in 2023.

Also, despite the slower growth, euro zone unemployment is to fall further to 7.3% of the workforce this year and to 7.0% in 2023 from 7.7% in 2021.