OPINION
Market Rating Before FOMC MeetingJan 31
Forecasts for the European Economy are Getting Worse
The European Central Bank (ECB) has published the results of Survey of Professional Forecasters for the third quarter of 2022.
During this period, the participants' consumer inflation forecast increased from 6.00 percent to 7.30 percent for 2022, while for 2023 it increased from 2.40 percent to 3.60 percent and for the long term from 2.10 percent to 2.20 percent.
Forecasters' core inflation forecast was revised from 2.90 percent to 3.60 percent for this year, while for next year, it fell from 2.30 percent to 2.00 percent. The long-term forecast increased from 1.90 percent to 2.20 percent.
On the other hand, according to the results of the survey, growth forecast for Euro Area economy decreased from 2.90 percent to 2.80 percent for this year and from 2.30 percent to 1.50 percent for 2023, while the forecast for the long term increased from 1.40 percent to 1.50 percent. In addition, the unemployment rate forecast decreased to 6.70 for 2022 and 2023, while the long-term rate was set at 6.40 percent.
The results of the ECB's quarterly survey show that expectations in the region are getting worse rapidly. In particular, the fact that the inflation forecast increased from 6.00 percent to 7.30 percent in the previous quarter clearly shows the decline in the forecasts. In the face of inflation, which has reached an all-time peak here, the share of the ECB, which hesitated to raise rates to monitor the effects of the Ukrainian war and the coronavirus lockdowns in China, is quite high.
Looking at the table on the other side, it is quite clear that participants do not expect a recession for the European economy. However, it is also understood that the monetary tightening that the ECB started this month is expected to accelerate economic activity.
Basically, the survey results show that inflation in Europe will remain high in 2022, but will approach the ECB's average target of 2 percent in 2023 and 2024, while growth will slow sharply in 2023 and fall on the appropriate track in 2024.
During this period, the participants' consumer inflation forecast increased from 6.00 percent to 7.30 percent for 2022, while for 2023 it increased from 2.40 percent to 3.60 percent and for the long term from 2.10 percent to 2.20 percent.
Forecasters' core inflation forecast was revised from 2.90 percent to 3.60 percent for this year, while for next year, it fell from 2.30 percent to 2.00 percent. The long-term forecast increased from 1.90 percent to 2.20 percent.
On the other hand, according to the results of the survey, growth forecast for Euro Area economy decreased from 2.90 percent to 2.80 percent for this year and from 2.30 percent to 1.50 percent for 2023, while the forecast for the long term increased from 1.40 percent to 1.50 percent. In addition, the unemployment rate forecast decreased to 6.70 for 2022 and 2023, while the long-term rate was set at 6.40 percent.
The results of the ECB's quarterly survey show that expectations in the region are getting worse rapidly. In particular, the fact that the inflation forecast increased from 6.00 percent to 7.30 percent in the previous quarter clearly shows the decline in the forecasts. In the face of inflation, which has reached an all-time peak here, the share of the ECB, which hesitated to raise rates to monitor the effects of the Ukrainian war and the coronavirus lockdowns in China, is quite high.
Looking at the table on the other side, it is quite clear that participants do not expect a recession for the European economy. However, it is also understood that the monetary tightening that the ECB started this month is expected to accelerate economic activity.
Basically, the survey results show that inflation in Europe will remain high in 2022, but will approach the ECB's average target of 2 percent in 2023 and 2024, while growth will slow sharply in 2023 and fall on the appropriate track in 2024.
