The rise in oil and gas prices failed to have a serious impact on the eurozone economy

Despite the sharp rise in oil and gas prices, the impact on the eurozone economy turned out to be smaller than initially expected.

European Central Bank economists attribute this to reduced dependence on fossil fuels, increased government spending, and investments related to artificial intelligence.

According to them, the eurozone economy is about twice as dependent on oil as it was in the early 1990s. The growing share of renewable and nuclear energy has also weakened the link between gas and electricity prices in several countries.

Economic growth is also being supported by rising demand in the technology sector and AI-related investments. Additional support has come from Germany's defense and infrastructure spending. Government spending growth in this direction accounts for about 0.5% of eurozone GDP, which is twice the figure forecast at the end of last year.

The European Central Bank believes these factors will not help the economy for long. If new disruptions occur in energy markets, economic growth will slow again, while price pressures will increase. The European Central Bank is also considering a further interest rate hike. The third increase this year is expected in December.

Source: Reuters