Bank of America is downgrading its forecast for the European economy due to the effects of the war in Ukraine. At the same time, however, he is optimistic that the Old Continent will henceforth follow the path of “More Europe”, with joint budget support, as shown by today’s Bloomberg information on a bond issue that will support countries’ spending in the sectors. energy and defense.
Bank of America downgrades its Eurozone growth forecast to 2.8% (-70 basis points) for 2022 and 1.7% (-50 basis points) for 2023.
Inflation forecasts are much higher, at 6% (+160 basis points) for 2022 and 2.4% (90 basis points) for 2023.
The house “sees” oil at $ 110 a barrel and gas at 105 euros on average this year, without much de-escalation in 2023.
This means that household consumption will be hit hardest, but exporters will also be affected, losing much of their sales to Russia.
But Europe’s strong response, despite the high cost to its own economy, makes Bank of America analysts optimistic that joint fiscal support will follow. Eventually, half of the economic shock will be eased by fiscal policy, the house estimates. This means that the economy will not avoid long-term scars, but it sends a strong message to the markets that “More Europe” is the answer to external shocks, limiting the expansion of spreads, despite the ECB’s move to normalize its policy.
In particular, BofA now estimates that the ECB will end QE in the third quarter of 2022, with the first rate hike (out of a total of five expected by the end of 2023), to follow in December 2022.
moneyreview.gr
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