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A survey of economists by the “Financial Times” showed that if sustained high inflation erodes consumers’ disposable income and forces the European Central Bank to withdraw stimulus measures faster than planned, the euro zone’s economic recovery may be affected. Be destroyed.
More than 40% of the 38 economists surveyed by the Financial Times believe that inflation is a major risk to the growth prospects of the 19 countries sharing a single currency—making it the most cited risk factor in 2022 along with the pandemic.
“Inflation will erode wages and reduce demand,” said Jesper Rangvid, professor of finance at Copenhagen Business School, adding that “the European Central Bank may also have to raise interest rates and curb inflation to deal with inflation risks. [economic] rise”.
European Central Bank Responded With the announcement of its 185 million euro pandemic response plan earlier this month, concerns about rapid price increases have intensified, which will stop net bond purchases in March as part of its “gradual” reduction in quantitative easing.
As the Eurozone economy rebounded from the impact of the pandemic, activity restrictions were lifted, supply was unable to keep up with demand, which pushed up energy costs and caused many material shortages. This year, the inflation rate has risen sharply.Consumer price growth in the Eurozone reached A record high It was 4.9% in November.
Like most central banks, European Central Bank Surprised by the pressure of continued price increases. This month, it sharply raised its forecast for inflation in the euro zone to 2.6% in 2021 and 3.2% in 2022-both higher than its 2% target.
Katharina Utermöhl, Senior European Economist at Allianz, said: “Our economic outlook fluctuates with the inflation outlook.” “If we see that the runaway inflation rate will remain above the target after 2022, then the European Central Bank will not Do not control its policy stance more abruptly than currently anticipated. This may put pressure on the real economy and exacerbate concerns about financial stability.”
What was the forecast result last year?
Not bad, but not bold enough.Economists surveyed by the Financial Times are encouraged by the launch of the coronavirus vaccine Expected The Eurozone economy will rebound strongly this year, with a growth rate of 4.3%. They are too timid: The European Central Bank estimates that the Eurozone economy will grow by 5.1% in 2021, the fastest expansion in decades.
Forecasters are also too pessimistic in most other forecasts. More than half of people expect the unemployment rate to exceed 10% for the first time in more than four years; in fact, it has recently fallen back to the pre-pandemic level of 7.3%.
Their biggest mistake is inflation. They estimate that this year’s average growth rate is only 1%, but well above the European Central Bank’s 2% target.
The average forecast of economists surveyed by the Financial Times before the European Central Bank updated its forecast this month is that the euro zone inflation rate will be 2.7% in 2022 and 1.9% in 2023. Their forecast is lower than the European Central Bank’s forecast for next year, but it is higher than the central bank’s forecast for the inflation rate to drop to 1.8% in 2023.
HSBC senior euro zone economist Fabio Balboni (Fabio Balboni) said: “The surge in energy prices is a major risk.”[By] Eroding the purchasing power of households, we estimate that it may drop 0.5 percentage points from the GDP level in the next few quarters,” which will put the “European Central Bank in trouble”.
In the year to October, producer prices rose by 21.9%, the fastest rate of increase since the creation of the euro more than 20 years ago. This was mainly driven by a 62.5% increase in energy prices, but even excluding industrial product prices still rose by 8.9%.
“Uncontrolled inflation is a greater risk [than the pandemic],” said Nicholas Bennanbrook, an international economist at Wells Fargo Bank. “The previous wave of Covid-19 virus usually had a short-term negative impact on economic growth, but it did not last long. We expect this pattern to continue. ”
However, nearly half of the economists surveyed believe that there are still major economic risks to the variants of the coronavirus.
On average, economists predict that the Eurozone economy will grow by 4% next year, slightly lower than the 4.2% forecast by the European Central Bank.
André Sapir, a professor at the Free University of Brussels, stated that the biggest challenge facing the EU is to “find the right balance between fiscal and monetary macro policies to achieve sustained recovery without uncontrolled fiscal conditions. And runaway inflation”.
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