LAST UPDATE 17:05
A completely different landscape is emerging in Europe after the outbreak of the Ukraine-Russia war over the prospects of inflation and economic growth, something that the President of the European Central Bank, Christine Lagarde, acknowledged today, noting that the ECB is now considering many different scenarios. .
“The Russia-Ukraine war will have a significant impact on economic activity and inflation through higher energy and commodity prices, the cessation of international trade and the weakening of confidence,” Lagarde told a news conference after the monetary policy decisions. .
“The extent of this impact will depend on how the conflict unfolds. [στην Ουκρανία], from the impact of current sanctions and possible further measures. Recognizing the extremely uncertain environment, the Board of Directors considered a number of scenarios in today’s meeting “.
In the basic scenario of the new projections of the bank, which incorporate a first assessment of the effects of the war, the GDP growth revised downwards in the short term, with the economy now growing by 3.7% in 2022, 2.8% in 2023 and 1.6% in 2024, Lagarde said. Last December, the forecast was for growth of 4.2% in 2022, 2.9% in 2023 and 1.6% in 2024.
For inflation, the President of the ECB pointed out that it continues to exceed estimates due to high energy costs. The baseline scenario is now upwardly revised, with annual inflation at 5.1% in 2022 and 2.1% in 2023 and 1.9% in 2024. In December the forecast was for inflation of 3.2% in 2022, and 1 , 8% in 2023 and 2024.
Excluding energy and food, inflation is expected to reach 2.6% in 2022 to fall to 1.8% in 2023 and 1.9% in 2024.
The ECB has considered other alternative scenarios for the impact of the war, without being able to rule out a further blow to economic activity from an even greater increase in energy and raw material prices. Inflation may be even higher in the short term, he warned.
In the adverse scenario the ECB raises its inflation forecast for 2022 to 5.9% and lowers its estimate for GDP growth to 2.5%, while in extreme scenario Inflation jumps to 7.1% and growth slows to 2.3%.
“There is huge uncertainty. We are keeping all the options on the table and we will move forward step by step,” he added.
Source: Capital
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