Winter 2019 Economic Forecast: growth moderates amid global uncertainties

Moscovici 2019 EU

Pierre Moscovici, Member of the EC in charge of Economic and Financial Affairs, Taxation and Customs, will give a press conference on the publication of the Winter 2019 Economic Forecast. © European Union , 2019 / Source: EC – Audiovisual Service / Photo: Mauro Bottaro.

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


The European economy is expected to grow for the seventh year in a row in 2019, with expansion forecast in every Member State. The pace of growth overall is projected to moderate compared to the high rates of recent years and the outlook is subject to large uncertainty.

Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “All EU countries are expected to continue to grow in 2019, which means more jobs and prosperity. Yet our forecast is revised downwards, in particular for the largest euro area economies. This reflects external factors, such as trade tensions and the slowdown in emerging markets, notably in China. Concerns about the sovereign-bank loop and debt sustainability are resurfacing in some euro area countries. The possibility of a disruptive Brexit creates additional uncertainty. Being aware of these mounting risks is half of the job. The other half is choosing the right mix of policies, such as facilitating investment, redoubling efforts to carry out structural reforms and pursuing prudent fiscal policies.”

Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said: “After its 2017 peak, the EU economy’s deceleration is set to continue in 2019, to growth of 1.5%. This slowdown is set to be more pronounced than expected last autumn, especially in the euro area, due to global trade uncertainties and domestic factors in our largest economies. Europe’s economic fundamentals remain solid and we continue to see good news particularly on the jobs front. Growth should rebound gradually in the second half of this year and in 2020.

Economic growth

Economic activity moderated in the second half of last year as global trade growth slowed, uncertainty sapped confidence and output in some Member States was adversely affected by temporary domestic factors, such as disruptions in car production, social tensions and fiscal policy uncertainty. As a result, gross domestic product (GDP) growth in both the euro area and the EU likely slipped to 1.9% in 2018, down from 2.4% in 2017 (Autumn Forecast: 2.1% for EU28 and euro area).

Economic momentum at the start of this year was subdued, but the fundamentals remain sound. Economic growth will continue, albeit more moderately. The European economy is set to continue to benefit from improving labour market conditions, favourable financing conditions and a slightly expansionary fiscal stance. Euro area GDP is now forecast to grow by 1.3% in 2019 and 1.6% in 2020 (Autumn Forecast: 1.9% in 2019; 1.7% in 2020). The EU GDP growth forecast has also been revised down to 1.5% in 2019 and 1.7% in 2020 (Autumn Forecast: 1.9% in 2019; 1.8% in 2020).

Among the larger Member States, downward revisions for growth in 2019 were sizeable for Germany, Italy, and the Netherlands. Many Member States continue to benefit from robust domestic demand, also supported by EU funds.

Inflation

Consumer price inflation in the euro area fell towards the end of 2018 due to a sharp drop in energy prices and lower food price inflation. Core inflation, which excludes energy and unprocessed food prices, was muted throughout the year, despite faster wage growth. Overall inflation (HICP) averaged 1.7% in 2018, up from 1.5% in 2017. With oil price assumptions for this year and next year now lower than in autumn, euro area inflation is forecast to moderate to 1.4% in 2019 before picking up mildly to 1.5% in 2020. For the EU, inflation is forecast to average 1.6% this year and then pick up to 1.8% in 2020.

Uncertainties

A high level of uncertainty surrounds the economic outlook and the projections are subject to downside risks. Trade tensions, which have been weighing on sentiment for some time, have alleviated somewhat but remain a concern. China’s economy may be slowing more sharply than anticipated and global financial markets and many emerging markets are vulnerable to abrupt changes in risk sentiment and growth expectations. For the EU, the “Brexit” process remains a source of uncertainty.

For the UK, a purely technical assumption for 2019

In the light of the process of withdrawal of the UK from the EU, projections for 2019 and 2020 are based on a purely technical assumption of status quo in terms of trading patterns between the EU27 and the UK. This is for forecasting purposes only and has no bearing on the process underway in the context of Article 50.

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 25 January 2019. For all other incoming data, this forecast takes into consideration information up until 31 January.

The European Commission publishes two comprehensive forecasts (spring and autumn) and two interim forecasts (winter and summer) each year. 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.

The European Commission’s next comprehensive forecast will be the Spring 2019 Economic Forecast in May 2019.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

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

Ηealth’s foundation is falling apart: what can we do about it?

A Monday to watch the final act of a Greek tragedy; will there be catharsis or more fear?

Human rights chief calls for international probe on Venezuela, following ‘shocking accounts of extrajudicial killings’

Statistics show the ugly face of youth training schemes

Young? You should work out the entrepreneurial heart before the mind

3 charts that show how attitudes to climate science vary around the world

This alliance aims to accelerate the adoption of inclusive, trusted and transparent AI worldwide

Guinea President Alpha Condé: “We must tackle the root causes of migration”

Unemployment worries spike around the world as coronavirus remains top global concern

Iraq: UN demining agency rejects desecration accusations, involving historic Mosul churches

Ramped-up emergency preparedness, part of ‘changing the DNA’ of the UN’s health agency

UPDATED: Guterres condemns armed attack against UN peacekeepers in Mali

Stigmatized, shunned and shamed, International Widows’ Day draws attention to their unique needs

Portugal: Budget MEPs back €4.66 m in job-search aid for 730 redundant workers

Hospitals among seven health centres attacked in Syria’s north-east

Bahamas: ‘Clock is ticking’ to help those who lost everything in Hurricane Dorian, says UN

Estonia: use robust growth to improve income equality and well-being

Haitian President at General Assembly calls for essential development aid as UN mission shifts away from peacekeeping

Rising human trafficking takes on ‘horrific dimensions’: almost a third of victims are children

One-in-five suffers mental health condition in conflict zones, new UN figures reveal

Idea of ‘homogenous’ Polish culture is a myth: UN human rights expert

Why a coronavirus vaccine takes over a year to produce – and why that is incredibly fast

The next decade is critical for the climate. Here’s how the circular economy can help

Shenzhen just made all its buses electric, and taxis are next

Is your business model fit for the Fourth Industrial Revolution?

Trump: Hostile to Europe, voids Tillerson’s “ironclad” ally pledge

Why Should We Care Universal Health Coverage?

UN expert criticizes States for ‘ganging up’ on Wikileaks’ Assange; warns against extradition, fearing ‘serious’ rights violations

EU-US Privacy Shield data exchange deal: US must comply by 1 September, say MEPs

Marginalized groups hit hardest by inequality and stigma in cities

EU should promote immigration as a humanitarian issue in order to provide a more permanent solution

You can make a difference in North Korea. Here’s how

Miguel Arias Cañete European Commission

EU should invest more in climate and not sit back on its laurels and watch

Business is a crucial partner in solving the mental health challenge

From social entrepreneurship to systems entrepreneurship: how to create lasting change

New technologies, artificial intelligence aid fight against global terrorism

MI6 chief calls for espionage 4.0 in the era of the Fourth Industrial Revolution

Trump’s MAGA policy remains unchanged as EU warns to impose additional retaliation tariffs on US products

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

Intergenerational, intercultural, interactive – The 2015 edition of JADE’s Generations Club: Transforming Europe into an entrepreneurial society

5 amazing people fighting to save the oceans

“We are in Europe, but not of it”, from Churchill to Cameron: British Exceptionalism now threatens the entire EU Edifice

Wednesday’s Daily Brief: Diplomacy for Peace Day, #VaccinesWork, the cost of war on Afghans, tech and well-being

Business leaders join UN to rev up sustainable development investments

Media freedom: EP warns of attempts to silence critics and undermine pluralism

World ‘off track’ to meet most Sustainable Development Goals on hunger, food security and nutrition

COVID-19 practices are constantly changing – this app helps emergency doctors cope

India should ‘unlock’ freedom curbs in disputed Kashmir, urges UN human rights chief

Hatred ‘a threat to everyone’, urges Guterres calling for global effort to end xenophobia and ‘loathsome rhetoric’

Europe plans to send satellites into space to monitor CO2 emissions

International Women’s Day 2021: COVID-19 pandemic is a major challenge for gender equality

Reintegrating former rebels into civilian life a ‘serious concern’ in Colombia: UN Mission chief

1 million citizens try to create a new EU institution

An American duel in Brussels: Salesforce against Microsoft over Linkedin deal

Statement by President Tajani on US steel and aluminium duties

5 amazing schools that will make you wish you were young again

Australia now has 25 million people. Will it choose to keep growing?

What does ‘excess deaths’ mean – and can it give a clearer picture of the number of coronavirus fatalities?

As inequality grows, the UN fights for a fairer world

Here’s how blockchain could stop corrupt officials from stealing school lunches

More Stings?

Advertising

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