MercoPress. South Atlantic News Agency

Euro-zone inflation, things will get worse before they begin to improve

Economics Commissioner Paolo Gentiloni warned “we're heading into rough waters,” at “very limited, reduced and slower economic growth”

The Euro-group, (countries using the Euro) finance ministers said that combating inflation was their number one priority. The announcement follows on the European Commission revised economic forecast anticipating dwindling growth and increasing geopolitical and natural disruptions to business as the biggest drags on the economy as a whole.

“What we see is that economic growth is proving quite resilient this year. Still, one can expect some downward revision and even more so for the next year because of many uncertainties and risks,” said Valdis Dombrovskis, executive vice-president of the European Commission for an Economy that Works for People, speaking in Brussels.

Moreover, Dombrovskis suggested, “inflation is going to be revised upwards.”

Economics Commissioner Paolo Gentiloni offered further warning, saying risk continues to increase in the face of the Russian gas supply cuts. “We're heading into rough waters,” he said, hinting at “very limited, reduced and slower economic growth” as a result of the widening energy crisis caused by the Russian invasion of Ukraine.

“What we are seeing is that these continued high energy prices are trickling down to the rest of the economy and inflation is getting more entrenched and more widespread,” warned Dombrovskis.

Other financial institutions, such as the International Monetary Fund (IMF), have also warned of the drag the war in Ukraine will put on Eurozone economies.

The European Commission had originally predicted 4% economic growth this year but it is now expected to drop to 2,7%. Next year's forecast looks gloomier still — originally pegged at 2.7%, it is now being revised down to 2.3%.

Annual inflation, which had been estimated to hit 3.5%, instead climbed to 6.1%, and monthly inflation for June ballooned to 8,6%. The European Central Bank is expected to raise interest rates for the first time in eleven years on 21 July.