As inflation continues to rise among members of the bloc, the European Union’s executive commission has predicted its member states will slide into recession in the winter.
The EU’s latest economic forecast on Friday projected that the high energy bills currently eroding consumer purchasing power will prolong inflation, which is expected to spike to 8.5% this year, then fall to 6.1% next year.
Growth forecast for 2023 was meanwhile lowered to 0.3%, down from July’s projection of 1.4%.
The latest forecast is more than two points higher than the EU’s last forecast in July.
Germany is expected to be next year’s worst performer in the bloc. Germany’s economic output is predicted to shrink by 0.6% over the next year.
Europe’s largest economy was the most dependent on Russian gas before the Ukraine war. It has therefore suffered from an energy crisis this year, as it grapples to find alternatives to Russian energy.
Better times expected in spring
The commission’s autumn forecast expects the economic output to plummet in the last three months of this year as well as the first few months of 2023.
High energy prices, an increased cost of living and interest rates are all “expected to tip the EU, the euro area and most member states into recession in the last quarter of the year,” the AP quoted the commission as saying.
“Growth is expected to return to Europe in spring, as inflation gradually relaxes its grip on the economy,” the report said. “However, with powerful headwinds still holding back demand, economic activity is set to be subdued.”
World economies have struggled this year, with a sharp increase in energy prices fueled by Russia’s war on Ukraine, coming on the heels of a pandemic which has brought economies to a halt for nearly two years.