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Deutsche Bank predicts “a deep recession” in the euro area,



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The euro zone will face a deeper recession than previously forecast after Russia halted natural gas deliveries via the Nord Stream 1 pipeline, according to a Deutsche Bank projection analysis cited by Bloomberg.

The euro zone economy will shrink by 2.2% next year, compared to a previous projection in July of minus 0.3%, German bank analysts said in a report to clients on Wednesday. The GDP of Germany, the largest European economy, but also the most exposed to the decrease in supplies of energy raw materials from Russia, will contract by up to 4%, the cited analysis shows.

The German bank’s forecast for 2024 shows a positive evolution of GDP in the euro area, anticipating growth of 1.2%, compared to an advance of just 1%, as it had previously estimated in the July forecast.

At the same time, average inflation could reach 6.2% in 2023, down from 8.2% in 2022, as supply chain disruptions, tight labor markets and the weakening of the euro partially compensates, in terms of the evolution of inflation, the impact of the deterioration of the economy.

Deutsche Bank also notes that it expects the European Central Bank to raise the deposit rate one more time to 2.5% by the end of the first quarter of 2023.