Autumn 2022 Economic Forecast: The EU economy at a turning point


As Russia’s war of aggression against Ukraine enters its ninth month, there is no sign of a let-up in the fighting, let alone a peaceful resolution of the hostilities. The war continues to cause untold suffering and destruction in Ukraine, but also has economic reverberations that extend far beyond. The sharp rise in inflation under the pressure of energy, food and other commodity prices is hitting a global economy that is still struggling with the economic consequences of the pandemic crisis. The EU is among the most exposed economies, due to its geographical proximity to the war and heavy – albeit much diminishing – reliance on imports of fossil fuels. Although creeping inflation had already dented some of the post-pandemic euphoria ahead of the war, real GDP growth in the first half of the year beat expectations. With the easing of containment measures, consumers resumed international travel and flocked back to restaurants, hotels and other contact-intensive services, unleashing a strong spending spree. The expansion continued in the third quarter, though at a weaker pace. As the terms-of-trade shock makes its way through the economy, the sharp erosion of the purchasing power of households has shifted consumers’ sentiment dramatically. Confidence plunged also in the business sector, amid high production costs, remaining supply bottlenecks, tighter financing conditions and heightened uncertainty.


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Source: European Commission Press

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