Energy crisis impacts the economy; EU lowers eurozone economic growth forecast

Golden Ten Data, May 21 — Due to energy price fluctuations triggered by conflicts in the Middle East impacting the economy, the European Union has lowered its expectations for economic growth in the eurozone and raised its inflation forecast for this year. Originally, after the inflation rate dropped below the European Central Bank's 2% target level, the eurozone economy was expected to grow at a moderate pace in 2026, but the outbreak of the Iran war has completely changed this outlook. In its semi-annual report, the European Commission stated that the eurozone's economic growth rate for 2026 is now expected to be 0.9%, compared to the previous forecast of 1.2% in November. At the same time, the organization has revised down its 2027 economic growth forecast from 1.4% to 1.2%. In addition, the inflation rate is expected to rise from last year's 2.1% to 3.0%, higher than the 1.9% forecasted in November last year. The increase in prices for 2027 is expected to be 2.3%, higher than the previous forecast of 2.0%. As a net energy importer, the eurozone is highly vulnerable to energy shocks caused by the closure of the Strait of Hormuz. The European Commission stated that, although commodity prices are expected to fall back in 2027, they may still remain about 20% higher than pre-war levels. The Commission said: “This conflict has fundamentally changed the situation, causing one of the most severe disruptions to the global energy supply in recent years.”