EU warns that a ceasefire cannot hide the worries of stagflation, plans to lower economic growth forecasts

CoinDesk April 9 news: According to a report by the UK’s Financial Times, Valdis Dombrovskis, Executive Vice President of the European Commission, warned that despite the U.S.-Iran reaching a two-week ceasefire agreement, the EU will still suffer a “stagflation shock” driven by low growth and rising inflation. Because the consequences of the conflict in the Middle East remain highly uncertain, the European Commission is preparing to cut this year’s growth forecast. Regarding the ceasefire agreement, he said: “This is undoubtedly a welcome step toward cooling down, and it is also expected to ease the energy crisis.” However, he cautioned that, “As for the impact of the war with Iran on the economy, of course, there is still a high degree of uncertainty,” and that “we are obviously facing a stagflation shock.” The European Commission will update its official GDP forecast in May. Before the outbreak of the conflict, the Commission predicted that economic growth in the EU this year would remain at 1.4%, and in 2027 it would be 1.5%. But according to analysis shared with the Financial Times, the Commission’s recent economic scenario modeling estimates that if energy prices fall back to the level before the war with Iran by the end of 2026, economic growth could slow by as much as 0.4 percentage points this year. If energy prices need more time to fall back to the pre-war level, economic growth could slow by 0.6 percentage points in both 2025 and 2026.