The European Commission cut its economic growth forecasts for the European Union (EU) and the eurozone for 2022 and 2023 and revised up its inflation estimates on Thursday.

 

According to the "Summer 2022 Economic Forecast," the EU economy is projected to grow by 2.7 percent this year and 1.5 percent in 2023, and the respective figures for the eurozone are 2.6 percent and 1.4 percent.

 

Annual average inflation in 2022 is projected to peak at historical highs of 8.3 percent in the EU and 7.6 percent in the eurozone.

 

In the third quarter of 2022, inflation is projected to peak at 8.4 percent year-on-year in the EU and the eurozone, and "from there decline steadily and fall below 3 percent in the last quarter of 2023 ... as the pressures from supply constraints and commodity prices fade."

 

Annual inflation jumped from 7.8 percent in March to 8.8 percent in May in the EU and from 7.4 percent in March to 8.6 percent in May in the eurozone.

 

Inflation is driven by energy and food prices, Paolo Gentiloni, European commissioner for economy, said as he presented the "Summer 2022 Economic Forecast" on Thursday.

 

Inflation and economic growth in both the EU and the eurozone have been impacted by the COVID-19 pandemic and the ensuing lockdowns and supply chain disruptions.

 

The EU's economic recovery in early 2022 from the COVID-19 pandemic has been interrupted by the Russia-Ukraine conflict.

 

"We are fortunate to be starting from a position of strength, having weathered through the previous crisis with a solid return to growth," Valdis Dombrovskis, European Commission vice president for an economy that works for people, commented.

 

"In Europe, momentum from the reopening of our economies is set to prop up annual growth in 2022, but for 2023 we have markedly revised down our forecast," Gentiloni said.

 

"None of the current risk factors for the eurozone economy is likely to disappear soon, not least the (conflict) in Ukraine. And that will continue to pile additional pressure on energy and commodity prices, and economic sentiment," commented Carsten Brzeski, global head of macro at ING.

 

However, "recent downward tendencies of oil and other commodities' prices could intensify, bringing about a faster deceleration in inflation," the Commission press release said.