The European Commission downgraded its growth outlook for the euro area economy citing the unprecedented disruption to global energy markets due to the conflict in the Middle East.
In the Spring Economic Forecast, the commission said the currency bloc is set to grow 0.9 percent this year, slower than the 1.2 percent projected earlier. The forecast for next year was trimmed to 1.2 percent from 1.4 percent.
The near-closure of the Strait of Hormuz sharply reduced oil supply, causing severe supply disruptions. The war in Iran has pushed up energy prices and damped confidence.
The energy shock is expected to drive euro area headline inflation to 3.0 percent this year compared to the previous forecast of 1.9 percent. The projection for next year was raised to 2.3 percent from 2.0 percent.
by Renju Jaya
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