scorecardresearchEuro zone to focus on inflation as economic outlook forecast to worsen

Euro zone to focus on inflation as economic outlook forecast to worsen

Updated: 11 Jul 2022, 04:06 PM IST
TL;DR.
At a regular monthly meeting of ministers, the EU executive commission is expected to provide an update of its economic forecasts, showing slower growth and higher inflation, officials said.
European Central Bank (ECB) President Christine Lagarde delivers a speech during a press conference after a Governing Council meeting focused on monetary policy in the euro zone in Amsterdam on June 9, 2022. - The European Central Bank on June 9, 2022 slashed its growth outlook for the eurozone to 2.8 percent in 2022 and 2.1 percent in 2023, as Russia's invasion of Ukraine wrought havoc on the world economy. (Photo by JOHN THYS / AFP)

European Central Bank (ECB) President Christine Lagarde delivers a speech during a press conference after a Governing Council meeting focused on monetary policy in the euro zone in Amsterdam on June 9, 2022. - The European Central Bank on June 9, 2022 slashed its growth outlook for the eurozone to 2.8 percent in 2022 and 2.1 percent in 2023, as Russia's invasion of Ukraine wrought havoc on the world economy. (Photo by JOHN THYS / AFP)

(Reuters) - Euro zone finance ministers are set to indicate on Monday that the fight against inflation is the current priority despite dwindling growth in the bloc, officials said, as they will be informed of a deteriorating economic outlook.

At a regular monthly meeting of ministers, the EU executive commission is expected to provide an update of its economic forecasts, showing slower growth and higher inflation, officials said.

Ministers will focus on fighting inflation, indicating a will to shift further away from the massive economic stimulus offered during the acute phase of the COVID-19 pandemic.

The fiscal advice should recognize that "we have moved away from the need to help the economy," one official said, echoing a recommendation for "a moderately restrictive fiscal policy" next year issued in June by the European Fiscal Board (EBF), an advisory body.

The EBF, whose recommendation will be discussed by ministers on Monday, urged fiscal prudence especially for countries with high debt, such as Italy, Greece or France.

The discussion on the 2023 fiscal stance comes before governments prepare their national budgets for next year.

The push against inflation, which would support the European Central Bank's planned tightening of monetary conditions, comes however amid an expected further drop in economic growth.

The Commission is set to again revise downwards its forecasts for the euro zone when it updates its outlook on Thursday, officials said.

In May, it had cut its growth forecasts for the 19 countries sharing the euro to 2.7% this year from 4.0% predicted in February, and to 2.3% next year from 2.7%, in its first assessment of the impact of the war in Ukraine on the bloc's economy.

Inflation forecasts are also expected to be revised upwards from the 6.1% predicted by the Commission in May for this year, which was in itself a major uplift from the previously estimated 3.5%.

The International Monetary Fund will also brief euro zone ministers at the meeting about its latest assessment of the bloc's economy.

 

First Published: 11 Jul 2022, 04:06 PM IST