MNI: EU Summer Forecasts To Signal Growth -Officials

The European Commission’s summer forecasts to be released on Thursday will indicate continued if lower levels of growth during the rest of this year and through 2023 in its central scenario, despite fears of recession exacerbated by Russian gas shutdowns, EU officials said on Wednesday.

“We are not speaking recession yet,” one official said following this week’s meetings of EU finance ministers in Brussels, where the Commission briefed officials on the state of its thinking on the economic outlook.

“We still think a Russian gas cut-off is a worst-case scenario and not our central scenario,” the source added.

There is even a suggestion that the forecast might see a slight technical upgrade because of the strong growth seen at the end of last year and early 2022.

But even while the Commission looks set to avoid a recession forecast, growth will nevertheless be forecast to slow significantly.

“The general idea is that the economy is still going to grow this year, it will grow at a much slower pace than earlier anticipated, but yes, we are still talking about growth,” the source said.

ADVERSE SCENARIO

The Commission’s May forecast included an adverse scenario forecast for a recession in event of total gas shutdown. A similar such scenario will be included in Thursday’s forecasts, and officials insist there is no complacency towards significant risks including inflation, widening government bond spreads and threats to energy supplies.

“We all knew there were a number of threats that could come and those haven’t materialised just yet, but everyone is getting prepared and governments at national level are taking action to counter the effects of a number of economic events that are unfolding,” the source said.

The Commission’s unveiling of its Winter Preparedness communication next Wednesday will provide details of a European policy response if Russian gas supplies are cut off, the source noted.

“One of the major risks the Commission sees – if Russia threatens to cut off the gas tomorrow or in a month’s time – is that a scenario similar to Covid will materialise and that states will compete against each other, making things worse.”