Costs of War Mount, Growth Sags
President Vladimir Putin’s invasion of Ukraine has shattered eurozone confidence and pushed consumer price expectations to their highest level since records began in 1985.
The economic fallout from the Ukraine conflict is spreading across Europe, as already-record inflation continues to rise and Germany faces a recession due to its reliance on Russian energy. Chancellor Olaf Scholz’s advisers slashed the continent’s largest economy’s growth forecast and warned that if natural gas supplies are cut off, the economy could contract.
Officials at the European Central Bank have dismissed talk of stagflation, claiming that growth in the 19-member eurozone will still exceed 2% even in their “severe” scenario for 2022.
However, the most recent data show that the forces that would result in such an outcome are gaining traction. Furthermore, several policymakers are pushing for a rate hike this year, which could have a negative impact on output.
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