The risk of recession in the Eurozone has reached its highest level since November 2020

Recession expectations in the euro area exceeded 50 percent. 

Economists participating in the Bloomberg survey expected an economic contraction in the next two quarters to reach 60 percent. In the previous survey period, this expectation was 45 percent. 

The cessation of natural gas shipments from Russia is expected to affect Germany, the largest economy in the Euro Zone. The growth in the German economy is likely to pause from this quarter. 

The increase in living costs negatively affects regional companies and households. Russia’s threats to halt energy shipments also raise concerns for the rest of the year. In addition, supply shortages are worsening due to the drought in the region. 

Inflation is expected to average 8 percent in 2022 and 4 percent next year. Survey participants expect inflation to reach the 2 percent target in 2024. 

Economists expect the European Central Bank to raise interest rates by 50 basis points in September, as it did in July.