News ID: 255579
Published: 1146 GMT July 10, 2019

Eurozone sees economic outlook worsening amid uncertain US trade policy

Eurozone sees economic outlook worsening amid uncertain US trade policy
SAUL LOEB/AFP

The European Commission lowered its forecast on Wednesday for the eurozone economy next year, saying that uncertainty over US trade policy posed a major risk to the bloc.

In its quarterly economic forecasts, the European Union’s executive arm also lowered its estimate for inflation in the bloc, predicting that it would be further off the European Central Bank’s target of close to but less than two percent, Reuters reported.

The commission confirmed its prediction that economic growth in the eurozone would slow this year to 1.2 percent from 1.9 percent in 2018. It also lowered its estimate for next year’s growth, which is now seen at 1.4 percent instead of the 1.5 percent forecast in May.

Risks for the bloc have increased, the commission said, and mostly come from ‘the elevated uncertainty’ around US trade policy, as Washington keeps threatening punitive tariffs on a broad range of EU products.

The weaker economic outlook contributed to a downward revision of inflation expectations, the commission said, cutting its estimate to 1.3 percent for this year and next from the 1.4 percent it previously estimated for both years.

This year’s forecast matches the ECB’s projection, but for 2020 the commission’s estimate is lower than the 1.4 percent rate forecast by the central bank in its latest projections, released in June. That could give the ECB a reason to push ahead with fresh stimulus.

 

Italy, Germany lag behind

 

The commission confirmed the economic slowdown in the eurozone was mostly caused by slower growth in Germany, the eurozone’s largest economy, and Italy, its third largest.

German growth will slow to 0.5 percent this year, it predicted in May, after reaching 1.4 percent in 2018. Growth is expected to return to 1.4 percent next year, less than the 1.5 percent the commission predicted earlier.

Forecasts for Italy remained unchanged, reiterating its economy will see the worst growth rate in the whole 28-country EU. Next year’s growth is expected to accelerate to 0.7 percent but remain the slowest in the bloc.

The commission maintained unchanged its forecasts for Britain, whose economy is foreseen growing 1.3 percent this year and next.

However, the projection does not take into account possible trade disruptions caused by a no-deal Brexit.

 

 

   
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Resource: Reuters
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