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(Bloomberg) — The euro area is facing a deeper recession than previously forecast after Russia halted natural gas deliveries through the Nord Stream 1 pipeline, according to Deutsche Bank economists.
Output will shrink 2.2% next year, compared with an earlier projection for a 0.3% contraction, the analysts said Wednesday in a report to clients. Gross domestic product in Germany, which is most exposed to lower energy shipments, will drop as much as 4%.
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Inflation, meanwhile, is seen averaging 6.2% in 2023, down from 8.2% in 2022, as continued supply-chain disruptions, tight labor markets and a weak euro offset the impact of the deteriorating economy.
Deutsche Bank still expects the European Central Bank to lift its deposit rate to 2.5% by the end of the first quarter.
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