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EU to cut economic growth outlook, sees higher inflation as prices in eurozone continue to hit record high

European Commission Executive Vice-President Valdis Dombrovskis

The European Commission says it will again cut its growth forecast for this year and hike its expectations for inflation, as prices in the eurozone continue to hit record highs.

"What we see is that economic growth is proving quite resilient this year. Still, one can expect some downward revision and even more so for the next year because of many uncertainties and risks," the European Commission's Executive Vice-President Valdis Dombrovskis said at a regular monthly meeting of the bloc's finance ministers in Brussels on Monday.

Dombrovskis further waned that "inflation is going to be revised upwards," as he gave a preview of the commission's most up-to-date forecasts that are due to be unveiled on Thursday.

"What we are seeing is that these continued high energy prices are trickling down to the rest of the economy and inflation is getting more entrenched and more widespread," he said.

Back in May, the commission had cut its growth forecasts for the 19 countries that use the euro to 2.7 percent in 2022 and 2.3 percent in 2023, down from a forecast of 4.0 percent and 2.8 percent just months earlier.

Inflation in the eurozone last month beat a new record, hitting 8.6 percent in defiance of hopes that the surge in consumer prices would begin to cool even as the military conflict in Ukraine still rages.

This was still far higher than the current forecast by the commission, which in May projected inflation in the eurozone at 6.1 percent for 2022 and 2.7 percent in 2023.

Meanwhile, EU Economic Commissioner Paolo Gentiloni said that "for the time being" Brussels expected "very limited, reduced and slowed-down growth."

"We are not in negative territory at the moment," he said.

Gentiloni further warned that risks to the economy are increasing as Russia could cut its gas supplies to Europe, amid the ongoing military conflict in Ukraine.

He also said Brussels could adopt a number of measures to reduce inflationary pressure from gas imports, including price caps, although no decision had been made on that yet.

An increase in energy prices in the world, which has intensified as a result of the Ukraine military conflict, has inflicted unprecedented levels of inflation on people living in countries using the euro.

European Union finance ministers also said the fight against inflation is their current priority, despite the expected further drop in the bloc's economic growth.

"The priority is to contain inflation," Spain's Economic Minister Nadia Calvino told reporters before the meeting.

Inflation is a major concern and is there to stay at high levels also next year, Dutch Finance Minister Sigrid Kaag said.

In June, the annual inflation in the eurozone countries reached more than 8.6%, exceeding the 8.1% recorded in May, with energy prices increasing 41.9%.

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