The Eurozone has already entered a “shallow” recession caused by a surge in energy prices, which will last until the end of the year.

Economists of the UBS group come to such an assessment, who predict that the eurozone economy will contract by 0.1% in the third quarter, and then by another 0.2% in the fourth.

“In light of the new rise in energy prices, which entails further new pressure on household consumption as well as on investment, we estimate that the eurozone will immediately enter a technical recession,” the group’s economists stressed, who at the same time added that if gas consumption is really rationed, “the economic impact will be much stronger.”

However, according to their estimates, there will be no serious shortage of energy, even if prices continue to rise.

The Eurozone economy will shrink by 0.1% in the third quarter and another 0.2% in the fourth.

Despite their bearish outlook for the current quarter and year-to-date, UBS economists have revised their full-year forecast upwards, given the eurozone’s strong performance in the second quarter through June. For the next year, on the contrary, they are revising their forecasts downward and now estimate growth of only 0.8%, while the previous forecast spoke of an increase of 1.2%.

However, Morgan Stanley economists are also expressing more pessimism about the eurozone as they predict a deeper recession than their previous estimate. “We estimate that the impact of the energy crisis will last longer into the next year as we see high energy prices and uncertainty about the continuation of energy supply in the winter,” analysts at Morgan Stanley emphasize, who, however, emphasize that “it’s not all so gray” because they assume that a recovery will follow because both private and public investment will increase.

Source: Bloomberg.