The eurozone is heading for a period of stagnant inflation, as efforts to curb rising inflation will bring growth rates just above zero, UBS said on Thursday, while cutting its 2022 economic forecasts for the region.
According to Reuters, UBS revised its GDP estimate down to 2.7% from 2.9% for 2022 and stressed that its forecast indicates that the Eurozone will marginally avoid a technical downturn.
“Combined with high inflation, this scenario is stagnant inflation,” analyst Reinhard Cluse wrote in a customer briefing.
The region’s economy grew much faster in the first quarter of the year than in the previous three months, but the negative impact of the war in Ukraine is expected to be felt in the second quarter.
UBS expects Germany to be closer to recession, with zero growth in the second half, closely followed by Italy. In contrast, growth in France and Spain is expected to be slightly higher, said Cluse, who also expects a limited recovery in 2023 as inflation slows and confidence recovers.
In his briefing, the UBS analyst also stressed that persistently high inflation will be a brake on household consumption, while higher input costs, uncertainty about energy supply, tightening financial conditions and weakening global demand will possibly corporate activity.
Source: Capital
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