Winter 2022 Economic Forecast
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Compared to the Autumn Forecast, inflation projections have been revised up, as energy prices are now set to remain high for longer and price pressures are broadening to several categories of goods and services. Inflation in the euro area is projected to peak in the first quarter of 2022 and remain above 3% until the third quarter of the year. As the pressures from supply constraints and energy prices fade, inflation is expected to decline markedly in the final quarter of the year and settle at below 2% next year. Overall, inflation in the euro area is forecast to increase from 2.6% in 2021 (2.9% in the EU) to 3.5% (3.9% EU) in 2022, before declining to 1.7% (1.9% EU) in 2023. The balance of risks to the growth outlook is broadly even. The current wave of infections could have a longer lasting economic impact than assumed, bringing fresh disruptions to critical supply chains. On the upside, household consumption could grow more strongly, as observed following previous waves, while investments fostered by the RRF could generate a stronger impulse to activity. The inflation projections are subject to upside risks if cost pressures are passed on from producer to consumer prices to a larger extent, increasing the likelihood of strong second-round effects. Risks to the growth and inflation outlook are aggravated by geopolitical tensions in Eastern Europe.

Manager’s Office Team                                                                                   

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