ECB expects robust growth in 2022 despite war-driven uncertainties

ANKARA

The European Central Bank (ECB) still expects the eurozone economy to grow robustly this year in its baseline scenario, while its forecast places inflation at around 2% in 2024, its chief Christine Lagarde said on Tuesday.

Speaking at the WELT Economic Summit in Berlin, Lagarde said Russia's ongoing war on Ukraine still continued, significantly increasing uncertainty.

"This tragedy is a watershed for Europe and it calls on all of us to revise our ambitions. And we, as the central bank of the euro area, will play our part too," she said, vowing that the bank would ensure smooth liquidity conditions.

Given the ECB's assessments of the impact of war, she said it would lower growth and raise inflation through higher energy and commodity prices, the disruption of international trade and weaker confidence.

"But, if the baseline scenario of the staff projections materializes, the economy should still grow robustly in 2022 thanks to the declining impact of the pandemic and the prospect of solid domestic demand and strong labor markets," she added.

On the bank's various scenarios, Lagarde noted that the repercussions of the war on the economy would depend on how the conflict evolves.

"In these scenarios, growth could be dampened significantly and inflation could be considerably higher in the near term," she said. "However, in all scenarios, inflation is still expected to decrease progressively and settle at levels around our 2% inflation target in 2024."

Russia's war against Ukraine, which began on Feb. 24, has drawn international condemnation, led to financial sanctions on Moscow and spurred an exodus of global firms from Russia.

At least 596 civilians have been killed and 1,067 injured in Ukraine since the beginning of the war, according to the UN. It has said, however, that the true toll is likely much higher as it has not been able to gain access to areas of increased hostilities.

Nearly 3 million people have also fled Ukraine, seeking refuge in neighboring countries, according to the UN's refugee agency.