Russia’s war against Ukraine has cast a dark shadow over our continent and is likely to trigger a slowdown in growth and higher inflation in the near-term. After the largest contraction on record in 2020, the euro area economy transitioned to a firm path of recovery in 2021.
However, rising inflationary pressures that had been building up since the latter half of last year and renewed pandemic-related restrictions look likely to have slowed the momentum of the recovery in 2022. The Russian invasion of Ukraine exacerbated these pressures on account of large rises in commodity and energy prices.