The European Commission on Monday sharply raised its inflation forecast for the eurozone this year while predicting slightly lower economic growth for the 15-nation single currency zone.
Annual inflation in the euro zone will increase to 3.2 percent in 2008 due to soaring oil and food prices, up from 2.6 percent previously estimated by the Commission in February and more than one percentage point higher than the 2.1 percent registered in 2007.
"The sharp increase reflected a combination of soaring oil and food prices and the fading of favorable base effects," the EC said in its spring economic forecast.
Pushed up by record-high oil prices and rising food prices, the euro zone inflation has doubled since August 2007, reaching 3.6 percent in March, the highest level in 12 years and well above the2-percent ceiling preferred by the European Central Bank to maintain price stability.
Moreover, inflation in the 27-nation EU also doubled to 3.8 percent in March 2008 from August 2007. Average inflation in the EU this year was expected to stay as high as 3.6 percent, up from 2.4 percent in 2007.
For 2009, the Commission forecast that inflation will ease to 2.2 percent in the euro zone and 2.4 percent in the European Union.
Meanwhile, the EU's executive arm trimmed its forecast for economic growth in the euro zone this year to 1.7 percent, slightly down from 1.8 percent predicted in its previous forecast in February.
The growth rate in the euro zone was 2.6 percent in 2007.
"The moderation in growth results from the persisting turmoil in the financial markets, the marked slowdown in the United States and soaring commodity prices, all of which are taking their toll on global activity," the Commission said.
Economic growth in the euro zone was expected to further slow down to 1.5 percent in 2009, according to the latest forecast.
In the 27-nation EU, the Commission said economic growth will reach 2.0 percent in 2008 and 1.8 percent in 2009 respectively, down from 2.8 percent last year.
"Economic growth is moderating in the EU and euro area and the current, imported inflationary pressures are a matter of concern," said Joaquin Almunia, EU Economic and Monetary Affairs Commissioner.
Source:Xinhua
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