The eurozone economy grew rapidly in the second quarter of this year, but the eurozone’s outlook could suffer as Russia continues to reduce gas supplies.
The 19-member bloc registered a gross domestic product share of 0.7% in the second quarter, according to Eurostat, Europe’s statistics office, beating expectations for 0.2% growth. The euro area posted a GDP of 0.5% in the first quarter of the year.
The numbers contrast sharply with the negative results in the United States for both are first and second quarteras the euro area continues to benefit from the reopening of its economy after the pandemic.
However, a growing number of economists are predicting the euro zone will slip into recession next year, with Nomura forecasting an annual decline of 1.2% and Berenberg for example forecasting a 1% decline.
Even the European Commission, the EU’s executive body, acknowledges that a recession is possible – and as early as this year if Russia completely cuts off the region’s gas supplies.
Officials in Europe have grown increasingly concerned about the possibility of a gas shutdown, with European Commission President Ursula von der Leyen saying Russia is “blackmailing” the region. Russia has repeatedly denied that it is weaponizing its fossil fuel supply.
However, Gazprom, Russia’s state-owned energy giant, reduced gas supplies to Europe through the Nord Stream 1 pipeline to 20% of its operating capacity this week. Overall, 12 EU countries have experienced partial disruptions in gas supplies from Russia, and several others have completely shut down.
This is a breaking news story and will be updated shortly.