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EU slashes economic growth forecast as fallout from war grows


The European Union has cut its forecast for economic growth in the 27-nation bloc amid the prospect of a long Russian war in Ukraine and disruptions to energy supplies

BRUSSELS — The European Union has cut its forecast for economic growth in the 27-nation bloc amid the prospect of a long Russian war in Ukraine and disruptions to energy supplies.

The EU’s gross domestic product will grow by 2.7% this year and 2.3% in 2023, the bloc’s executive said on Monday – its first economic forecast since Russia invaded Ukraine on February 24. .

The European Commission’s previous outlook called for growth of 4% this year and 2.8% in 2023. The EU economy grew by 5.4% last year after a deep recession caused by the pandemic of COVID-19. GDP fell by 5.9% in 2020.

“Russia’s invasion of Ukraine has posed new challenges, just as the Union has recovered from the economic impacts of the pandemic,” the commission said when releasing the forecast. “War exacerbates pre-existing headwinds to growth.”

The war clouded what was usually a bright economic picture for the EU. At the start of this year, European policymakers were counting on solid, albeit weaker, growth while grappling with runaway inflation triggered by a global energy crisis.

Today, energy has become a key issue for the EU as it seeks sanctions that strip Russia of tens of billions in trade revenue without plunging member countries into recession. Soaring energy prices are driving record inflation, making everything from food to housing more expensive.

Russia is the EU’s biggest supplier of oil, natural gas and coal, accounting for around a quarter of the bloc’s total energy. Last year, EU energy imports from Russia totaled 99 billion euros ($103 billion), or 62% of the bloc’s purchases of Russian goods.

An EU ban on coal from Russia is due to start in August and a voluntary effort is underway to cut demand for Russian natural gas by two-thirds this year. A proposed oil embargo has hit roadblocks amid reserves in some landlocked countries that rely heavily on Russian oil, such as Hungary.

All of this has the EU scrambling to secure alternative energy supplies in the coming months, including from fossil fuel exporting countries such as the US and from domestic renewable sources meant to help the bloc. achieve its longer-term climate goals.

ABC News

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