The eurozone is expected to avoid a recession despite a sharp energy shock, although growth will remain weak due to pressure from high oil and gas prices, which will restrain economic activity and slow disinflation. This is according to a report by BofA Global Research.<\/p>\n
The bank has lowered its eurozone growth forecast to 0.6% this year and 1.0% next year, describing the outlook as a \u201cmajor shock\u201d driven by energy prices. At the same time, it noted that a \u201ctechnical recession has been avoided,\u201d but \u201cthe recovery will be weak.\u201d<\/p>\n
The revised forecast is based on assumptions about energy markets. Brent crude is expected to average around $100 per barrel through the end of 2026, while Dutch TTF gas is projected at about \u20ac80 over the coming winter.<\/p>\n
The report notes that \u201csome persistent supply losses will prevent a rapid adjustment in global energy prices,\u201d continuing to weigh on the economy even if geopolitical tensions ease.<\/p>\n
The growth outlook reflects a total downgrade of 90 basis points compared to previous estimates. Household behavior is expected to soften the initial impact: \u201cconsumers will offset the initial shock by reducing their savings rate\u201d in the second quarter of the year.<\/p>\n
Despite avoiding a recession, output is expected to remain below its pre-shock trajectory, and \u201ca sequential recovery from Q4 2026 is likely to be weak,\u201d indicating ongoing economic fragility.<\/p>\n
Inflation is projected to rise to 3.3% this year before easing to 2.1% next year, with oil driving a rapid increase and gas prices adding persistence.<\/p>\n
The report states that \u201cdisinflation is being delayed,\u201d with headline inflation expected to fall below 2% only in the second half of 2027, and core inflation by the end of that year.<\/p>\n
The European Central Bank is expected to respond with tighter policy in the short term. BofA forecasts rate hikes of 25 basis points in June and July, bringing the deposit rate to 2.50%, before cuts begin in June 2027. The report notes that \u201cthe ECB is nervous,\u201d reflecting concerns about inflation risks.<\/p>\n
Country-level dynamics highlight uneven exposure to the shock. Germany is seen as \u201cthe most vulnerable,\u201d with its growth forecast cut to 0.3%, while Italy is projected at 0.2%, reflecting higher sensitivity to energy prices.<\/p>\n
France and Spain are expected to perform better due to their energy structures and policy measures, although both will still face slower growth and higher inflation.<\/p>\n
The baseline scenario assumes the shock will remain price-driven without causing supply shortages.<\/p>\n
However, analysts warn that a stronger energy shock could alter the outlook, noting that higher oil and gas prices would \u201cpush the eurozone into recession.\u201d<\/p>\n","protected":false},"featured_media":151435,"menu_order":0,"template":"","newscat":[9],"newstag":[],"issues":[],"class_list":["post-151434","news","type-news","status-publish","has-post-thumbnail","hentry","newscat-novosti"],"_links":{"self":[{"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/news\/151434","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/news"}],"about":[{"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/types\/news"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/media\/151435"}],"wp:attachment":[{"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/media?parent=151434"}],"wp:term":[{"taxonomy":"newscat","embeddable":true,"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/newscat?post=151434"},{"taxonomy":"newstag","embeddable":true,"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/newstag?post=151434"},{"taxonomy":"issues","embeddable":true,"href":"https:\/\/ldaily.ua\/en\/wp-json\/wp\/v2\/issues?post=151434"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}