The EU and euro area economies had been on a path of strong recovery and growth coming out of the pandemic, but a new surge in energy prices, linked to Europe's dependence on Russian energy, is driving inflation to record highs. Moreover, Ukraine and Russia produce almost a third of the world's wheat and barley and are major exporters of metals. Disruptions to these supply chains as well as rising costs for many raw materials have pushed up the cost of food and other basic goods and services. As a result, the EU recently cut its forecast for growth and hiked its inflation forecast. Real GDP growth in both the EU and the euro area is now expected to reach 2.7% percent in 2022 and 2.3% in 2023, down from 4.0% and 2.8% (2.7% in the euro area), respectively, from the winter 2022 interim forecast. Inflation – forecast at 3.9% just a few months ago – is now expected to average 6.8%. The war is also hurting some EU economies more than others. Germany’s growth forecast is one of the lowest in Europe at 1.6%. While the challenges are real, according to Maria Demertzis, Deputy Director of Brussels-based thinktank Bruegel, “the European economy is in a good position to wear this off. Now, whether we will manage it depends, of course, [on] also how the war itself develops."