(CN) — During the first month of Russia's invasion of Ukraine, inflation across the European Union hit a record high 6.2%, largely driven by rising costs of energy, the EU's statistics agency Eurostat reported Thursday.
The previous 25-year high of 5.6% occurred in January.
“The euro area economy has faced a number of challenges over the last months. The rapid economic recovery from the pandemic emergency has been coupled with higher energy costs, supply-side constraints and price pressures,” said Christine Lagarde, president of the European Central Bank, in a Thursday speech.
“Now, owing to the war, Europeans will in the short term be confronted with higher inflation and slower economic growth,” Lagarde said, adding that the 19-state euro area’s central bank plans to execute economic sanctions against Russia.
Malta and France recorded the lowest inflation rates at 4.2% in February, while Estonia and Czechia topped 10%. Lithuania, which borders Russian ally Belarus, reported 14% inflation through February.
Rising 3.12 percentage points, energy costs contributed more to overall inflation than all other industries combined.
The EU imports more than a quarter of its crude oil from Russia, along with 46% of solid fuel and 40% of natural gas.
Energy imports vary across member states, with Cyprus importing 100% of its energy. France and Croatia import more than three-quarters of their energy. Several countries import less than a quarter of their energy, including Lithuania, Spain, Luxembourg, Poland and Italy, according to Eurostat.
Prior to Russia’s invasion of Ukraine, the EU’s Winter 2022 forecast anticipated rising inflation through the first two quarters of the year, driven by pandemic-related supply chain bottlenecks and surges in energy prices. The EU remained optimistic as GDP and employment rebounded from pandemic lows. The war, however, changes these projections.
“Energy prices are expected to stay higher for longer, with gas prices up by 73% since the start of the year and oil prices up by 44%,” Lagarde said.
With Russia and Ukraine producing nearly a third of global wheat exports, costs of food are also expected to rise, alongside potash, natural gas and fertilizer. The war has also disrupted Russian exports of palladium used to make catalytic converters, and Ukraine's production of neon gas.
Optimistically, the EU hopes inflation will average to 5.1% by the year's end. Under more "severe" projections, inflation may rise beyond 7%.
Alongside the February increases in energy, costs of services increased 1 percentage point. Prices in the food, alcohol and tobacco and industrial goods sectors rose by less than a point.
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