The risk of recession in the eurozone is growing oPeniazoch – oPeniazoch.sk

The risk of a recession in the Eurozone is growing as the probability of natural gas shortages increases and core inflation reaches record levels. TASR informs about this on the basis of a survey among leading economists contacted by the Bloomberg agency. According to experts, the probability of an economic decline in the Euroregion has increased to 45% from 30% in the previous survey and 20% before the Russian invasion of Ukraine at the end of February. In the case of Germany, one of the most vulnerable countries in the currency bloc, when it comes to limiting Russian energy flows, it is more likely to fall into recession than to avoid it. “Let’s assume a recession in inventory with the oil embargo in place and the impact of high input prices on the industry,” said Erik-Jan van Harn, strategist at Rabobank. “The German economy is slowing down and the trend is clearly downward.” The rising cost of living is taking its toll on both consumers and businesses, while still recovering from two years of the COVID-19 pandemic. Low gas supplies from Russia pose a threat to winter energy supplies. Inflation forecasts were revised downwards compared to the previous survey, even though price growth is expected to slow to 2% in 2024, which is the European Central Bank’s (ECB) target. Respondents in the survey continue to predict that inflation will peak in the current 3rd year. It is expected that the ECB will raise its deposit rate to 0.75% by the end of the year, and it will be equal to 1.25% in March next year. It was previously expected to reach this level in June 2023. The eurozone “is likely to enter a mild recession in the second half of this year, but this will not be enough of a drag on demand to keep inflation moving towards the target, should the ECB remain on the path of gradual rate increases ,” said James Rossiter, economist at TD Securities.