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#ECForecast - 'Growth clouded by external factors' Summer 2019 Economic Forecast

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The European economy continues to be clouded by external factors including global trade tensions and geopolitical uncertainty. The manufacturing sector, which is the most exposed to international trade, is projected to weaken over the year. The GDP forecast for the EU remains unchanged at 1.4% in 2019 and 1.6% in 2020.  

Always eager to be upbeat the European Commission points out that the European economy is set for its seventh consecutive year of growth in 2019, with all EU countries expecting some degree of growth.

Growth in the eurozone was stronger than expected in the first quarter of the year due to a number of temporary factors such as mild winter conditions and a rebound in car sales. It also benefited from fiscal policy measures, which boosted household disposable income in several states.
 Euro Vice President Valdis Dombrovskis said:
"All EU economies are still set to grow this year and next, even if the robust growth in Central and Eastern Europe contrasts with the slowdown in Germany and Italy. The resilience of our economies is being tested by persisting manufacturing weakness stemming from trade tensions and policy uncertainty. On the domestic side, a “no deal” Brexit remains a major source of risk.”
Economic and Financial Affairs, Taxation and Customs Commissioner Pierre Moscovici said:
"The European economy continues to expand against a difficult global backdrop. [...] Given the numerous risks to the outlook, we must intensify efforts to further strengthen the resilience of our economies and of the eurozone as a whole."
Domestic demand, particularly household consumption, continues to drive economic growth in Europe helped by the continued strength in the labour market.
US and China confrontation
An extended economic confrontation between the US and China, together with the elevated uncertainty around US trade policy could prolong the current downturn in global trade and manufacturing and affect other regions and sectors.
Brexit
For the UK, a technical assumption is made that projections for 2019 and 2020 are again based on a continuation of the status quo in terms of trading patterns between the EU27 and the UK. The Commission is keen to make clear that this is for forecasting purposes only and that it has no bearing on future negotiations between the EU and the UK.

Catherine Feore

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