It was expected that the shortage of energy would eventually slow down the economy.
According to the answers that analysts gave to a poll done by Bloomberg, there is an 80% chance that the economies in the Euro area will go into a recession within the next twelve months. This is because energy prices are going up so fast and there is a serious shortage of power.
According to a report published by the agency on Monday, the projection raises the chance of a recession in the zone with a single currency to its highest level since July 2020. Previously, the risk had been estimated at 60%.
It has been said that Germany, which has the biggest economy in the bloc, is one of the most vulnerable to cuts in gas supply, and it is expected that Germany’s economy will start shrinking as soon as this quarter.
The most recent cutoff of gas supplies from Russia is unavoidably escalating the crisis, which has been going on for some time. As a direct result of sanctions, the Nord Stream 1 pipeline experienced significant technical issues in August, which led to its indefinite shutdown. Through the last surviving transit line in Ukraine and the TurkStream pipeline that runs through Turkey, Russian gas is now flowing to the region at a volume that is a small fraction of what it used to be.
Analysts note that record-high inflation rates and other supply constraints across the euro area continue to hold down GDP, and they forecast that inflation will peak at 9.6% during the fourth quarter of 2022. The European Central Bank has set their inflation target at 2%, but the experts polled don’t believe it will reach that level until 2024.