European Economic Forecast Spring 2022

Almost two years after the start of the pandemic, Russia’s war against Ukraine poses new challenges to the EU economy.

Key facts:

• Real GDP growth in both the EU and the euro area is now expected at 2.7% in 2022 and 2.3% in 2023, down from 4.0% and 2.8% (2.7% in the euro area), respectively, in the Winter 2022 interim forecast (WiF).
• The downgrade for 2022 must be read against the background of the growth momentum gathered by the economy in spring and summer last year, which adds around 2 percentage points to the annual growth rate for this year (see Box I.2.1.).
• Output growth within the year has been reduced from 2.1% to just 0.8%.
• These revised growth projections imply slower convergence to the output level that the economy would have attained in the absence of the pandemic shock – based on an extrapolation of the growth outlook from the last forecast preceding the pandemic.
• In turn, the projection for inflation has been revised up significantly. In the EU, HICP inflation is now expected to average an all-time high of 6.8% in 2022, before declining to 3.2% in 2023.
• In the euro area, inflation is projected at 6.1% in 2022 and 2.7% in 2023.
• This compares with 3.5% and 1.7%, respectively, in the WiF.