Europe’s recession to deepen further, forecasts Deutsche Bank

Central Bank Vice President Luis de Guindos said that even a recession over the winter is not enough to reduce inflation without further rate hikes

FP Staff September 22, 2022 12:38:04 IST
Europe’s recession to deepen further, forecasts Deutsche Bank

Deutsche Bank has forecasted a deeper recession for Europe next year. AFP

New Delhi: Deutsche Bank has forecasted a deeper recession for Europe next year. It has revised the euro area GDP for 2023 to 2.2 per cent from 0.3 per cent.

“The baseline call we made in July for a mild recession this winter is now too benign,” Deutsche Bank’s chief economist for Europe, Mark Wall, said in a research note.

“We now foresee a longer and deeper recession. We are revising the euro area GDP forecast for 2023 from – 0.3 per cent to 2.2 per cent,” the economist said.

The forecast comes amid the euro area facing an acute recession than previously forecast after Russia halted natural gas deliveries through the Nord Stream 1 pipeline in early September, economists from Deutsche Bank said.

The cutoff has now increased further potential upside to inflation and downside to growth.

The economists of Deutsche Bank said they are sticking to expectations for the European Central Bank deposit rate to top out at 2.5 per cent, but that that call comes with two-sided risks.

For the unversed, Europe is stuck in an energy crisis and this is likely to worsen with winters approaching.

The situation in Europe does not seem favourable as the cost of electricity in most places in the continent has risen sharply that industries and factories have been forced to shut down.

Meanwhile, in France, officials have proposed to turning out the lights on the iconic Eiffel Tower earlier than usual to conserve energy.

On Wednesday, Central Bank Vice President Luis de Guindos said that even a recession over the winter is not enough to reduce inflation without further rate hikes. Addressing a conference, he said: “Markets believe that the slowdown of the economy would reduce inflation by itself.”

With inputs from agencies

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