The Organization for Economic Co-operation and Development (OECD) announced that it has decreased its growth forecast for the Eurozone to 0.8 percent and projected increased inflation for the current year, following a major rise in energy costs resulting from the conflict in the Middle East.
In its report, the OECD indicated that it reduced its Eurozone growth forecast by 0.4 percentage points to 0.8 percent, while also lowering growth projections for the continent’s two largest economies, Germany and France, by 0.2 percentage points to 0.8 percent each.
The OECD also raised its inflation forecast for the Eurozone by 0.7 percentage points to 2.6 percent.
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The report stated that “higher energy prices – and the unpredictable nature of the escalating conflict in the Middle East – will lead to increased costs and reduced demand, which will offset the positive impact of strong investment and production in the technology sector, lower effective rates, and the momentum extending from 2025.”
Moreover, the report indicates that energy disruptions are assumed to ease beginning in mid-2026, while also cautioning against the high degree of uncertainty associated with the ongoing conflict.
The report notes that “a prolonged period of high energy prices will significantly increase business costs and raise the rate of consumer price inflation, which will have serious consequences for growth.”
