Can the Euro area avoid recession as energy shock hits growth? in World Economy News 08/04/2026 The euro area is expected to avoid a recession despite a sharp energy shock, but growth is set to remain weak as higher oil and gas prices weigh on activity and delay disinflation, according to BofA Global Research. The bank cut its euro area growth forecast to 0.6% this year and 1.0% next, describing the outlook as “a big shock” driven by energy prices, while stating that “a technical recession is avoided” and “the recovery will be shallow.” Energy assumptions underpin the downgrade, with seen near $100 per barrel until late 2026 and around €80 through next winter. The report says “some permanent damage to energy supply will prevent a swift correction in global energy prices,” keeping pressure on the economy even if geopolitical tensions ease. The growth outlook reflects a cumulative loss of 90 basis points compared with earlier forecasts. Household behavior is expected to cushion the initial impact, with “consumers buffer the initial impact with a reduction in the savings rate” in the second quarter of 2026, while fiscal support remains limited at around 0.2%–0.3% of GDP in discretionary measures. Despite avoiding recession, output is expected to remain below its pre-shock path, with “the sequential growth recovery from 4Q26 likely to be shallow,” indicating persistent weakness. Inflation is projected to rise to 3.3% this year before easing to 2.1% next year, with oil driving a rapid increase and gas prices adding persistence. The report states that “inflation undershoot is delayed,” with headline inflation seen falling below 2% only in the second half of 2027 and core inflation by the end of that year. The European Central Bank is expected to respond with tighter policy in the near term. BofA forecasts 25 basis point rate hikes in June and July 2026, taking the deposit rate to 2.50%, before cuts begin in June 2027. The report notes, “the ECB is nervous,” reflecting concerns about inflation risks. Country-level dynamics highlight uneven exposure to the shock. Germany is seen as “the most vulnerable,” with growth cut to 0.3% this year, while Italy is forecast at 0.2%, reflecting higher energy sensitivity. France and Spain are expected to fare better, supported by energy structures and policy measures, though both face slower growth and higher inflation. The baseline assumes the shock remains limited to prices, with no supply shortages. However, the report warns that a stronger energy shock could alter the outlook, stating that higher oil and gas prices “would push the Euro area into recession.” Source: Investing.com 2026-04-08 hellenicshippingnews... window.___gcfg = {lang: 'en-US'}; (function(w, d, s) { function go(){ var js, fjs = d.getElementsByTagName(s)[0], load = function(url, id) { if (d.getElementById(id)) {return;} js = d.createElement(s); js.src = url; js.id = id; fjs.parentNode.insertBefore(js, fjs); }; load('//connect.facebook.net/en/all.js#xfbml=1', 'fbjssdk'); load('https://apis.google.com/js/plusone.js', 'gplus1js'); load('//platform.twitter.com/widgets.js', 'tweetjs'); } if (w.addEventListener) { w.addEventListener("load", go, false); } else if (w.attachEvent) { w.attachEvent("onload",go); } }(window, document, 'script')); tweet Share