PARIS —
The war in Ukraine will weigh heavily upon economic growth in the eurozone, the
IMF said Tuesday, as the conflict wreaks havoc on energy prices and the
manufacturing sector.
اضافة اعلان
The International
Monetary Fund revised down its eurozone growth forecast for 2022 to 2.8
percent, from 3.9 percent in its January estimate, with the region’s biggest
economy, Germany, taking a heavy hit.
“The main channel
through which the war in
Ukraine and sanctions on Russia affect the euro area
economy is rising global energy prices and energy security,” the IMF said in
its World Economic Outlook report.
The war has hurt
some countries like
Italy and
Germany more than other European nations because
they had “relatively large manufacturing sectors and greater dependence on
energy imports from Russia”, the IMF said.
Germany’s economy
is now expected to grow by 2.1 percent this year, down from the previous
forecast of 3.8 percent. Italy will also take a heavy hit, with growth of 2.3
percent compared to an earlier forecast of 3.8 percent.
After Moscow’s
invasion in February, the West including eurozone countries imposed sanctions
on Russia’s financial system, aviation sector and other major parts of the
economy.
Nearly two months
later, prices are rising. Oil remains above $100 per barrel after reaching
historic highs in March, while the price of gas, wheat, aluminum, nickel, and
other raw materials have soared.
As a result,
consumer price inflation in the eurozone has surged to 7.5 percent, an all-time
high.
Pierre-Olivier
Gourinchas, chief economist of the IMF, warned during a briefing that any
tightening of sanctions would lead to “a more significant reduction in economic
activity in the euro area”.
But in comments
likely to provide a little relief, Petya Koeva Brooks, deputy director in the
IMF’s research department, said the Fund does not expect a recession in the
eurozone area.
ECB holds steady
The drag from the
war in Ukraine comes as the eurozone economy was set to fully recover from the
pummeling it took from the pandemic in 2020.
The IMF had
predicted last October that eurozone growth would be 4.3 percent in 2022 before
lowering the forecast in January due to a global supply chain crisis and the
emergence of the Omicron variant of the coronavirus.
The IMF’s latest
report also lowered the eurozone’s growth outlook for 2023 to 2.3 percent, down
from 2.5 percent previously.
But it slightly
increased its forecast for Germany to 2.7 percent. Italy’s growth, however,
will slow further to 1.7 percent.
The war is
“severely affecting the euro area economy”, European Central Bank chief
Christine Lagarde said last week, pointing to a fall in economic confidence and
persistently high energy costs for households and businesses.
The ECB last
month slashed its growth forecast for 2022 to 3.7 percent from the 4.2 percent
it previously predicted.
It also warned
inflation will soar in the eurozone area, but it has yet to follow the US
Federal Reserve in raising interest rates to tame prices.
But the IMF’s
Gourinchas said that with multiple issues facing Europe including rising
inflation, “there is a risk there might be a need for more of a tightening”
from the ECB.
Similarly, the
Organization for Economic Cooperation and Development said in March that
eurozone growth risked being cut by up to 1.4 percentage points while inflation
would increase by 2.5 percentage points over a year if the war’s impact proves
to be lasting.
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