Hilde C. Bjørnland, a professor of economics at the BI Norwegian Business School, estimates that a 10% increase in oil prices due to geopolitical tensions or supply constraints will reduce GDP in the euro zone by 0.5%.
Underlining the gloomy outlook, PMI data and Germany’s Ifo survey both dropped more than expected this month, showing a deterioration in business morale, though neither indicated an outright recession. A key sentiment indicator also dropped, although less than some feared. Speaking in private, policymakers were less optimistic however, fearing that energy supply woes will persist all year, sapping household purchasing power and inevitably dragging the bloc into recession.
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