BAKU, Azerbaijan, October 15. Energy prices in Europe are unlikely to return to their pre-war levels soon, Alfred Kammer, Director of the European Department of the International Monetary Fund (IMF), said during a press briefing October 14, Trend reports via IMF.
“Gas flows from Russia to Europe have dropped by over 80 percent relative to 2021. As a result, energy prices have spiked, and they are unlikely to return to their pre-war levels soon. This terms-of-trade shock has raised firms’ costs and led to a cost-of-living crisis. In response to higher and more persistent inflation, central banks have acted forcefully, and financial conditions have tightened. Under these forces, the European outlook has darkened, with growth set to drop and inflation to remain elevated,” he said.
Kammer went on to add that GDP growth in advanced Europe is forecast to fall from 3.2 percent in 2022 to 0.6 percent in 2023—implying a downward revision for 2023 of 0.7 percentage point from IMF’s July World Economic Outlook Update projections.
“In emerging European economies, growth is also projected to decline sharply, from 4.3 percent in 2022 to 1.7 percent in 2023—a downward revision of 1 percentage point. In the conflict countries, output losses will be very large; Ukraine will see its GDP contract by over a third in 2022, while in Russia GDP is projected to be about 10 percent lower by 2023 than pre-war forecasts.
Inflation should decline steadily next year, but it will stay significantly above central bank objectives. We project headline inflation at about 6 percent in advanced European economies and 12 percent in emerging economies in 2023,” he said.
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