FRANKFURT (Reuters) – Euro zone growth will remain positive this year but the first half will be especially weak with barely any positive growth, European Central Bank Vice President Luis de Guindos said on Thursday.
High energy prices are sapping consumer spending power and business confidence is also taking a nose dive due to Russia’s war in Ukraine, exacerbating supply-chain issues that held back industrial production.
“My impression is that growth in the first quarter of this year… will be slightly positive, we’ll have very low growth,” de Guindos told a forum in Amsterdam. “In the second quarter of the year, my impression is that growth will be hovering (around) zero.”
He added that some rebound in the second half was likely and stagflation, a phenomenon associated with high inflation and stagnating growth, was unlikely for now.
De Guindos added that inflation was likely to keep rising over the coming months and peak around mid-year.
“I think inflation will continue rising over the next months but we expect that inflation will start to decline in the second half of the year and I hope the peak will be reached in three-four months (from now),” de Guindos said.
March inflation data, due on Friday, is expected to show a record high reading above 7%, well in excess of the ECB’s 2% target.
(Reporting by Balazs Koranyi; Editing by Gareth Jones and Jon Boyle)