UPDATE - ECB expects robust growth in 2022 despite war-driven uncertainties

REVISES DECK; UPDATES WITH MORE REMARKS FROM LAGARDE

By Aysu Bicer

ANKARA (AA) - The European Central Bank (ECB) still expects the eurozone economy to grow robustly this year in its baseline scenario, while its forecast places inflation at around 2% in 2024, its chief Christine Lagarde said on Tuesday.

Speaking at the WELT Economic Summit in Berlin, Lagarde said Russia's ongoing war on Ukraine is significantly exacerbating uncertainty.

"This tragedy is a watershed for Europe and it calls on all of us to revise our ambitions. And we, as the central bank of the euro area, will play our part too," she said, vowing that the bank would ensure smooth liquidity conditions.

Given the ECB's assessments of the impact of the war, she said it would lower growth and raise inflation through higher energy and commodity prices, the disruption of international trade, and weaker confidence.

"But, if the baseline scenario of the staff projections materializes, the economy should still grow robustly in 2022 thanks to the declining impact of the pandemic and the prospect of solid domestic demand and strong labor markets," she added.

On the bank's various scenarios, Lagarde said the repercussions of the war on the economy would depend on how the conflict evolves.

"In these scenarios, growth could be dampened significantly and inflation could be considerably higher in the near term," she said. "However, in all scenarios, inflation is still expected to decrease progressively and settle at levels around our 2% inflation target in 2024."

- Asset purchases

Lagarde also said the bank decided to reduce the pace of net asset purchases for the second quarter.

If the incoming data backs medium-term inflation expectations even after the end of net purchases, Lagarde said the bank will finalize net purchases in the third quarter.

But if the medium-term inflation outlook changes, she said the bank will revise its schedule for net purchases in terms of size and/or duration.

"Any adjustments to interest rates will take place some time after the end of our net purchases and will be gradual," she underlined.

Russia's war against Ukraine, which began on Feb. 24, has drawn international condemnation, led to financial sanctions on Moscow and spurred an exodus of global firms from Russia.

At least 596 civilians have been killed and 1,067 injured in Ukraine since the beginning of the war, according to the UN. It has said, however, that the true toll is likely much higher as it has not been able to gain access to areas of increased hostilities.

Some 3 million people have also fled Ukraine, seeking refuge in neighboring countries, according to the UN refugee agency.