Citigroup has cut its growth forecast for the euro zone today, saying the bloc's plan to wean itself off Russian energy imports could be a drag on its economy for years and would stall a quick recovery from the pandemic's blows.
Citi estimates the euro zone's 2022 GDP growth to average at 2.2%, down from its prior estimate of 3.3%.
For 2023, it now expects 2.6%, compared with 2.8% projected previously.
"The latest geopolitical events will likely reduce euro zone exports, depress household real incomes, weigh on confidence and thus on business investment, disrupt production processes," Citigroup economist Christian Schulz said.
The European Commission published plans this week to cut EU dependency on Russian gas by two-thirds this year and end its reliance on Russian supplies of the fuel "well before 2030".
Europe depends heavily on Russian energy imports, which have grown since the global financial crisis, according to analysts, citing Eurostat data.
Citigroup estimates that overall, Russia covers more than 40% of Europe's gas needs.
"In the medium-term, the re-routing of supply chains away from Russia would add to the pandemic shock and potentially lead to supply displacement and rising prices for several years," Schulz warned.
