The EU's official in charge of economic affairs said on Monday that the tense situation in the Red Sea caused by the attack on commercial ships by Houser militants may begin to have an impact on energy prices and inflation in the coming weeks.
EU Economic Commissioner Paolo Gentilloni said, "We know that at the beginning of this year, economic growth slowed down and there was some good news in the labor market, but concerns about the downside risks caused by geopolitical tensions are increasing, especially what is happening in the Red Sea."
He pointed out that "there is currently no significant impact on energy prices and inflation, but we believe it should be closely monitored as these impacts may occur in the coming weeks."
Last Friday and Saturday, the United States and the United Kingdom launched airstrikes on the Houthi militants in Yemen, attempting to prevent Iranian backed Houthi militants from attacking ships in the Red Sea. These attacks forced the closure of important shipping routes for many large companies.
The Eurozone is expected to experience weak growth this year
The chaos in the Red Sea situation is undoubtedly adding insult to injury to the eurozone, as its largest economy, Germany, experienced weak growth and a year-on-year decline in output last year.
However, overall, the situation in 2024 is still optimistic. Eurogroup Chairman Paschal Donohoe stated that the eurozone may grow by around 1% this year as it has withstood the adverse effects of sustained inflation and the Ukrainian war.
He said, "Looking ahead to 2024, I still believe that the eurozone economy is performing well against this backdrop of economic challenges. Although this is lower than the growth rate I hope to see, it is still growing despite facing various challenges."
The European Commission previously predicted that due to high employment rates and declining inflation, the European economy will experience a mild rebound in 2024. It is predicted that the Eurozone economy, which includes the 20 member states of the European Union, will grow by 1.2% in 2024, while the overall EU will grow by 1.3%.
However, it should be noted that any impact of the Red Sea crisis on inflation could worsen these predictions and lead to the European Central Bank delaying interest rate cuts.