EU economy faces more pain in 2023 after a gloomy year

Significant driver

The economists said the high cost of energy has been the single most significant driver of inflation in the eurozone, and looks set to continue to be, with prices likely to rise by an additional 2.7 percent in 2023. And the economists said the eurozone's economy will likely shrink, by almost 0.01 percent. The prediction is worse than the European Commission's expectation that the economy will grow by 0.3 percent, Agence France-Presse reported. And it is worse than the ECB's prediction of a 0.5 percent expansion.

The economists told the FT they expect the ECB to counter high inflation with interest rate cuts in 2023, which could "lead to a severe recession in the euro area".

Consequently, inflation is likely to remain above the ECB's target of 2 percent for at least two more years, with the consensus saying it will sit around 6 percent in 2023, and 2.7 percent in 2024, the FT reported. And the economists said unemployment could rise from the record eurozone low of 6.5 percent recorded in October, to 7.1 percent by the end of 2023.

Many countries are now grappling with cost-of-living crises because wages are not keeping up with inflation, forcing households to make difficult choices in their spending.

Russia, meanwhile, has reacted to attempts to force lower global energy prices through an imposed price cap on its exports.

Agencies via Xinhua contributed to this story.

EARLE GALE in London

earle@mail.chinadailyuk.com