The euro area will slip into a mild recession in the fourth quarter of this year amid reduced energy supplies from Russia, according to a report by Morgan Stanley published on Wednesday and seen by Bloomberg.
The projection claims that the economic contraction will last for two quarters before growth resumes in the second quarter of 2023, driven by an increase in investment.
The outlook has been downgraded due to growing concerns over reduced Russian natural gas supply, as well as falling consumer and business sentiment and soaring inflation.
“The risks around the outlook have intensified,” the Morgan Stanley economists wrote.
They indicated that despite the economic slowdown, the European Central Bank could lift its deposit rate at every meeting this year so that it reaches 0.75% in December.
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