The European Commissioner for Economy, Valdis Dombrovskis, warned that the EU economy is facing the risk of stagflation, as a result of rising energy prices.

The European Commissioner for Economy, Valdis Dombrovskis, warned that the economy of the European Union is facing the risk of stagflation, as a result of rising energy prices following the conflict in Iran. Dombrovskis emphasized that slower economic growth could coincide with higher inflation, estimating a decrease in the EU's GDP by 0.4 percentage points in 2026.

If disruptions in energy supply persist, the impact could be even more severe, with a decrease of 0.6 percentage points. At the meeting of EU Finance Ministers, it was agreed that national measures to mitigate the impact of high fuel prices should be temporary and targeted towards the most vulnerable households.

Dombrovskis mentioned that most member states have limited fiscal maneuvering space, and higher inflation could prompt the European Central Bank to raise interest rates. The next monetary policy meeting of the ECB is scheduled for March 19.