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Europe stares at 'stagflation', says UBS

Economic Indicators Jun 30, 2022 13:26
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© Reuters. FILE PHOTO: A man pushes a shopping cart in Nice, France, June 10, 2022. REUTERS/Eric Gaillard

(Reuters) - Eurozone is headed toward "stagflation" as efforts to stamp out a surge in inflation will bring growth to a near halt in the second half of the year, UBS said on Thursday, while trimming its 2022 economic forecast for the region.

The brokerage cut its GDP estimate to 2.7% from 2.9% for 2022 and said its forecast implies that the region, while clearly slowing down, would narrowly avoid a technical recession.

"Together with high inflation, this scenario qualifies as stagflation," analyst Reinhard Cluse wrote in a client note.

The region's economy grew much faster in the first quarter of the year than in the previous three months, but the negative impact of the Ukraine war is expected to be felt in the second quarter.

UBS expects Germany to come closest to a recession, with zero growth in the second half, closely followed by Italy. In contrast, growth in France and Spain should hold up slightly better, Cluse said.

It also expects a limited rebound in 2023 as inflation decelerates and confidence recovers.

The brokerage said persistently high inflation would be a drag on household consumption, while higher input costs, uncertainty about energy supplies, the tightening of financial conditions and weakening global demand would likely weigh on corporate activity.

Europe stares at 'stagflation', says UBS
 

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Comments (5)
Vladimirovich Vladimir
Vladimirovich Vladimir Jul 04, 2022 23:46
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I have a few palaces but theyve been mostly seized now but amazing places! Even made some movies at them 🤣
Vladimirovich Vladimir
Vladimirovich Vladimir Jul 04, 2022 23:45
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EU has some of best experiences and quality available not found anywhere else worldwide, a price worth paying for and experiencing. You wont regret it.
Vladimirovich Vladimir
Vladimirovich Vladimir Jul 04, 2022 23:42
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Some countries trying to force up prices, drop production, imduce diseases, a quick check of where product is from and how you choose to spend you euro, pound or kroner will soon stop that and keep eu alive and well. Buy EU
Vladimirovich Vladimir
Vladimirovich Vladimir Jul 04, 2022 23:38
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Not if people would check where its made and buy European!
Matt Hester
Matt Hester Jul 01, 2022 12:18
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Because the ECB keep kicking the can down the road, useless comes to mind. Euro going to suffer big time because of their incompetence
 
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