Filenews 8 September 2022
A significant slowdown in the European economy in the coming months, but not a recession in 2023 based on its baseline scenario, is expected by the European Central Bank, as the boost given by tourism in the summer will gradually evaporate.
"Tourism supported economic growth in the third quarter, but the economy will slow down significantly in the rest of the year," ECB President Christine Lagarde said, speaking at the press conference after the mammoth increase in European interest rates by 75 basis points.
As the ECB President explained, the economic slowdown is due to four main factors:
-High inflation continues to weigh on production and expenditure
-The strong recovery of services that followed the opening of economies after the pandemic is losing momentum
-Foreign demand loses momentum as the global economy weakens and global trade slows down
-Uncertainty remains high and confidence is receding
The head of the ECB in her speech described an environment where risks to growth are downwards and risks to crowding remain on the upside.
For next year, however, and through intensified warnings about the risk of recession, Lagarde clarified that the ECB continues to expect, in its baseline scenario, stagnation for the Eurozone and not a recession. "The forecast for a recession is there, but in a negative scenario," he said.
Unanimous decision on the increase of 75 bps.
Lagarde also noted that today's decision of the Board was unanimous. "There were different opinions, there was a thorough discussion and the decision was unanimous."
"Our methodology is well known. We rely on the incoming data and proceed step by step in each meeting. It is therefore on the basis of the extremely high inflation figures and our analysis that we have reached our decision. The main source of inflation remains energy, but also the large increases in food. Inflation is now spreading to many sectors of the economy, to many services and products.
So in the face of the very high and persistent inflation, we were urging to take decisive action."
The ECB president also noted that further increases in her interest rates will be needed, pointing out that decisions on size and pace will be made step-by-step, at each meeting separately.
Source: Capital.gr
