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

Advertising

Featured Stings

Syria: Civilians caught in crossfire, UN refugee chief urges Jordan to open its border

A Sting Exclusive: “There can be no global deal on emissions without China and the USA”, Conservative MEP Ian Duncan stresses from Brussels

Vendor Pulse – 2000

Eurozone: Subdued inflation can lead to more recession

A rapid deterioration of the humanitarian situation in the war-torn Yemen

Girls still being treated as aliens in medicine in the 21st century

Statement by the Brexit Steering Group on UK paper on EU citizens in the UK

Europe on the Move: Commission completes its agenda for safe, clean and connected mobility

Bayer’s cross at night (Copyright: Bayer AG)

The EU clears Bayer-Monsanto merger amid wide competition and environmental concerns

A European student just sets the question of the day: What kind of education policies are missing in Europe?

ECOFIN: Choosing between the re-unification of Eurozone and a stalemate

Millions of young lives ‘at risk’ says UN labour chief, calling for an end to child labour

JADE Testimonial #3: Sebastian @ Fundraising

First-ever EU defence industry fund to finance joint development of capabilities

Trump stumbles badly on his Russian openings; Europeans wary of Putin

A Sting Exclusive: “One year on from the VW scandal and EU consumers are still in the dark”, BEUC’s Head highlights from Brussels

Will the European Court of Justice change data privacy laws to tackle terrorism?

“C’est la vie”? French recession and unemployment to linger in Eurozone

ECB: Growth measures even before the German elections

UN official sees ‘unprecedented opportunities’ to make progress on peace in Afghanistan

Happens now in Brussels: Green Week sets the EU and global climate policy agenda

The “Legend of the Sun” wishes you Happy Chinese New Year 2015 from Brussels

MWC 2016 LIVE: The top 5 themes of this year’s Mobile World Congress

Merkel, Mercedes and Volkswagen to abolish European democracy

Ahead of State of the Union the European Youth Forum highlights lack of action on youth employment

On Google antitrust case: “Let’s face it, some companies want to hurt Google and it goes as simple as that”

The South China Sea Arbitration: Illegal, Illegitimate and Invalid

Employers’ organizations work towards improving the enabling environment for sustainable enterprises

A Sting Exclusive: “Climate change and youth inaction: oblivion or nonchalance?”, AIESEC wonders from Brussels

“A global threat lies ahead worsened after the EU’s green light to the Bayer-Monsanto merger”, a Sting Exclusive by the President of Slow Food

Professional practices of primary health care for Brazilian health and gender inequality

MWC 2016 LIVE: Getty chief says one in four new images from phones

The widely advertised hazards of the EU not that ominous; the sting is financial woes

In Finland, speeding tickets are linked to your income

Two shipwrecks add to ‘alarming increase’ in migrant deaths off Libya coast: IOM

Entrepreneurship’s key to success showcased by a serial young entrepreneur

MEPs call on EU countries to end precarious employment practices

Refugee crisis update: EU seeks now close cooperation with Africa while Schulz is shocked to witness live one single wreck full of immigrants

The EU Parliament unanimously rejects Commission’s ideas about ‘seeds’

The role of public affairs in student NGOs

No end to Deutsche Bank’s problems: new litigations in the US and frailty in EU stress test

The missiles fired against Damascus, Syria divided Europe deeply

UN member states express their will to tackle global migration but specific actions are still missing

Some Prevailing Arguments and Perceptions over the South China Sea Issue Are Simply Wrong

Fear casts again a cold, ugly shadow over Europe; Turkey sides with Russia

Italy’s rescue operation Mare Nostrum shuts down with no real replacement. EU’s Triton instead might put lives at risk

This tool shows you which cities will flood as ice sheets melt

JADE Testimonial #2: Jacques @ Process mapping

Eurozone very close to a sustainable growth path

ILO warns of widespread insecurity in the global labour market

Why Renewable Energy is an attractive investment

Leading Palestinian legislator calls for ‘new international engagement’ in two-state solution

Why the ECB had to clarify it caters for the entire Eurozone not just Germany?

“Leaked” TTIP document breaks post 8th negotiations round silence and opens door to critics

Is poverty and exclusion the necessary price for EU’s recovery?

The Italian ‘no’ and France’s Fillon to reshape Europe; Paris moves closer to Berlin

“Working together to make a change at the COP 21 in Paris”, an article by Ambassador Yang of the Chinese Mission to EU

Germany may have a stable and more cooperative government

Autonomous vehicles could clog city centres: a lesson from Boston

EU and US close to an agreement on data sharing amid European citizens’ concerns

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 )

w

Connecting to %s