Action is needed now to avoid further investment leakage due to rising costs
BusinessEurope today published its Autumn 2022 Economic Outlook
7 November 2022 - Our autumn economic forecast shows that the EU economy will grow by 2.8% between 2021 and 2022, but only 0.6% in 2023, a downward revision of 1.5 percentage points from our summer Economic Outlook.
Even this disappointing outlook will depend upon no further increases in energy prices, a further easing of supply chain pressures, and policies that respond to the energy price shock in a timely, comprehensive, and well-balanced way.
BusinessEurope Markus J. Beyrer said: "Business sentiment has declined rapidly after a strong first half year driven by post-Covid service sector reopening. Soaring energy bills and ongoing supply chain disruptions mean costs for businesses are rising much faster than for households. With margins narrowing and consumer demand also falling, many businesses will face a battle for survival this winter. Recent decisions to invest on other continents rather than in Europe due to concerns over long-term energy prices in the EU, which have been heightened by the depth of the present energy crisis in the EU, are a signal that cannot be ignored. Action is needed now to avoid further investment leakage.
EU leaders need to agree urgently on new measures to alleviate energy costs for businesses. In particular, policy-makers should consider EU-wide measures to temporarily decouple electricity prices from gas prices and grant governments the necessary flexibility to support businesses while maintaining a level playing field in the single market.
In terms of macroeconomic policy, rapid agreement on the reform of the Stability and Growth Pact can support member states in ensuring that the long-term strengthening of public finances is not unduly delayed. Whilst further interest rate hikes are likely to act as an additional drag on growth, they may nevertheless be essential to help ensure inflation expectations remain well anchored. Social partners can play an important role in helping to continue to prevent the emergence of a damaging wage-price spiral."
Our Autumn 2022 Economic Outlook is available here.