Summer 2018 Interim Economic Forecast: Resilient Growth amid increased uncertainty

Dombrovskis 2018_

© European Union , 2018 / Photo: Mauro Bottaro

This article is brought to you in association with the European Commission.

Growth is set to remain strong in 2018 and 2019, at 2.1% this year and 2% next year in both the EU and the euro area.

However, after five consecutive quarters of vigorous expansion, the economic momentum moderated in the first half of 2018 and is now set to be 0.2 percentage points lower in both the EU and the euro area than had been projected in the spring.

Growth momentum is expected to strengthen somewhat in the second half of this year, as labour market conditions improve, household debt declines, consumer confidence remains high and monetary policy remains supportive.

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “European economic activity remains solid with 2.1% GDP growth forecast for the euro area and the EU28 this year. Nevertheless, the downward revision of GDP growth since May shows that an unfavourable external environment, such as growing trade tensions with the US, can dampen confidence and take a toll on economic expansion. The growing external risks are yet another reminder of the need to strengthen the resilience of our individual economies and the euro area as a whole.”

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “Growth in Europe is set to remain resilient, as monetary policies stay accommodative and unemployment continues to fall. The slight downward revision compared to the spring reflects the impact on confidence of trade tensions and policy uncertainty, as well as rising energy prices. Our forecast is for a continued expansion in 2018 and 2019, although a further escalation of protectionist measures is a clear downside risk. Trade wars produce no winners, only casualties.”

Fundamentals remain solid but growth is set to moderate

The fundamental conditions for sustained economic growth in the EU and the euro area remain in place. The moderation in growth rates is partly the result of temporary factors, but rising trade tensions, higher oil prices and political uncertainty in some Member States may also have played a role.

Globally, growth remains solid but rates are becoming more differentiated across countries and regions.

Inflation forecast driven higher by energy prices

As a result of the rise in oil prices since the spring, inflation this year is now forecast to average 1.9% in the EU and 1.7% in the euro area. This represents an increase of 0.2 percentage points in both areas since spring. The forecast for 2019 has been raised by 0.1 percentage points for the euro area to 1.7% but remains unchanged at 1.8% for the EU.

There are significant downside risks to this forecast

While the recent strong economic performance has proven to be resilient, the forecast remains susceptible to significant downside risks, which have increased since spring.

The forecast baseline assumes no further escalation of trade tensions. Should tensions rise, however, they would negatively affect trade and investment and reduce welfare in all countries involved. Other risks include the potential for financial market volatility linked to, inter alia, geopolitical risks.

For the UK, a purely technical assumption for 2019

Given the ongoing negotiations on the terms of the UK withdrawal from the EU, our projections for 2019 are based on a purely technical assumption of status quo in terms of trading relations between the EU27 and the UK. This is for forecasting purposes only and has no bearing on the talks underway in the context of the Article 50 process.

Background

This forecast is based on a set of technical assumptions concerning exchange rates, interest rates and commodity prices with a cut-off date of 28 June. For all other incoming data, this forecast takes into consideration information up until 3 July.

As of this year, the European Commission has reverted to publishing two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year, instead of the three comprehensive forecasts in winter, spring and autumn that it has produced each year since 2012. The interim forecasts cover annual and quarterly GDP and inflation for the current and following year for all Member States and the euro area, as well as EU aggregates. This change is a return to the Commission’s previous pattern of forecasts and brings the Commission’s forecast schedule back into line with those of other institutions (e.g. the European Central Bank, International Monetary Fund, Organisation for Economic Co-operation and Development).

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Chart of the day: These are the cities where the World Cup threatens productivity the most

Impressions of China

Commission goes less than mid-way on expensive euro

EU elections 2019: Trump’s share in the support of populism

Irish Presidency: Not a euro more for EU budgets

Addressing the consequences of digitalisation in the Russia & CIS region

The Brexit factor in the US-China trade war and other conflicts

EU members commit to build an integrated gas market and finally cut dependency on Russia

Hostages to a rampant banking system

Meet Alice, the battery-powered plane that could herald the age of electric air travel

European elections: A chance to repel both nationalism and no-deal Brexit

Imported and EU fisheries products should be treated equally

Glaringly false reassurances about the repercussions of the EU-US free trade agreement

Will the outcome of the UK referendum “calm” the financial markets?

Scientists in Sweden are studying the climate-cooling effects of spruce forests

In Sweden you can roam anywhere you like, without the landowner’s permission

Dieselgate: Parliament calls for mandatory retrofits of polluting cars

The punishment gap: how workplace mistakes hurt women and minorities most

OECD Donor countries need to reform development finance to meet 2030 pledge

Presentation of Juncker’s Investment Plan: Can 315 billion euros save the EU?

5 steps that could end the plastic pollution crisis – and save our ocean

The refugee crisis seen through the eyes of a young doctor from Turkey

“Will TTIP solve the massive EU-US unemployment? Absolutely not!” A revealing Sting Exclusive with Tim Bennett from the Transatlantic Business Council

This is why people live, work and stay in a growing city

4 bold new ways New York is going clean and green

Statelessness for terrorists’ families, never an acceptable option, urges UN rights chief

‘Historic moment’ for people on the move, as UN agrees first-ever Global Compact on migration

DR Congo: days ahead ‘critical’ to ‘historic election process’ Security Council hears

Ireland’s planning to make its Emerald Isle even greener

Greece: The new government of Alexis Tsipras shows its colors

The influence of the multilateral agreement on migrant health

Here are 10 of Nelson Mandela’s most inspirational quotes

Somalis ‘will not be deterred’ by Friday’s terror attacks – UN chief

Accountability for atrocities in Myanmar ‘cannot be expected’ within its borders – UN investigator

To rebuild trust in the media, we must empower its consumers

The big challenge of leadership and entrepreneurship in Europe

Europe led by Germany seems vulnerable to Trump’s threats

GSMA Announces First Keynote Speakers for 2019 “MWC Los Angeles, in Partnership with CTIA”

Tragedy of Mediterranean deaths continues, as seven drown, 57 rescued: UN migration agency

Yemen: UN Envoy ‘guilty’ of optimistic hope that war is ‘nearing the end’

EU-Ukraine Summit: moving forward together in solidarity

Second Ebola death confirmed in Uganda as UN health agency mulls global emergency call

Under-fives’ daily screen time should be kept to 60 minutes only, warns WHO

Back to school: Schoolchildren to receive milk, fruits and vegetables at school thanks to EU programme

A day in the life of a Rohingya refugee

FROM THE FIELD: Weaving profits in Azerbaijan

Migrant caravan: UN agency helping ‘exhausted’ people home

OECD household income up 0.7% in first quarter of 2018, outpacing GDP growth

European Union presents its progress towards sustainable development

Tax Inspectors Without Borders making significant progress toward strengthening developing countries’ ability to effectively tax multinational enterprises

Korea must enhance detection and reinforce sanctions to boost foreign bribery enforcement

Refugee crisis update: Commission still in panic while Turkey is to be added in the equation

Does the Commission subsidise a forced labour scheme in Britain?

COP21 Breaking News_09 December: List of Recent Climate Funding Announcements

Why the ECB suddenly decided to flood banks with money?

Europe bewildered by radicalisation and terrorism

Climate change is speeding up. Our response needs to be even faster

Syria still suffering ‘staggering levels’ of humanitarian need, Security Council hears

How India is solving its cooling challenge

World’s human rights watchdog spotlights Afghanistan, Yemen and 12 others: Here’s the scoop

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s