Europe’s record inflation ‘to peak at year-end but stay high in 2023’

Europe’s record-high inflation is ready to peak in the direction of the top of this yr however will stay excessive into 2023,  in line with the European Fee’s autumn financial forecast.

“The financial state of affairs has deteriorated markedly and we’re heading into two quarters of contraction,” stated EU financial system commissioner Paolo Gentiloni at a press convention.

The EU’s government revised up its forecast from July, predicting that inflation for the yr would common 9.3% within the EU and eight.5% within the eurozone.

“The EU is among the many most uncovered superior economies (to excessive costs), resulting from its geographical proximity to the battle and heavy reliance on gasoline imports from Russia,” the European Fee stated in an announcement.

“The power disaster is eroding households’ buying energy and weighing on manufacturing.”

Whereas costs are anticipated to come back down in 2023, inflation remains to be predicted to be at 7% within the EU and 6.1% within the eurozone, earlier than reducing to three% within the EU and a pair of.6% within the euro space in 2024.

Common inflation for 2022 was highest within the Baltics, the place it was forecast to be 19.3% in Estonia, 18.9% in Lithuania, and 16.9% in Latvia this yr.

EU labour markets are anticipated to react to the slowing financial system however “stay resilient”, the EU stated, with employment development anticipated to be at 1.8% earlier than “coming to a standstill in 2023”.

Unemployment charges within the EU have been projected to be at 6.2% in 2022, 6.5% in 2023, and 6.4% in 2024.

GDP development is predicted to be stronger than the EU first predicted, at round 3.3% within the European Union as a result of easing of COVID-19 measures.

However that GDP development will probably be round simply 0.3% within the EU and euro space in 2023, the European Fee predicted.

The brand new percentages have been revised up from the European Fee’s final financial outlook, which predicted that inflation would attain a mean of seven.6% within the eurozone this yr and eight.3% within the EU.

The European Central Financial institution has in the meantime raised rates of interest 3 times this yr to deal with the rising costs.

The financial institution might proceed to lift rates of interest, which impacts industrial banks, which means that mortgages and bank cards would change into costlier.

The central financial institution’s governing council stated on the finish of final month that inflation remained “far too excessive and can keep above the goal for an prolonged interval.”

Inflation within the eurozone reached a file excessive of 10.7% in October, in line with Eurostat’s flash estimate on the finish of the month.

The rise was fuelled by power costs which Eurostat estimated have been 41.9% larger than in the identical month final yr. Costs for meals, alcohol and tobacco have been up by 13.1% in comparison with final yr.