Sat, Feb 09, 2019 - Page 5 News List

EU cuts eurozone growth forecast, inflation to slow

TRADE TENSIONS:The EU Commission expects that economic growth would slow to 1.3% this year from 1.9% last year before rising to 1.6% next year

Reuters, BRUSSELS

A woman sets up a British flag ahead of a meeting between British Prime Minister Theresa May and European Council President Donald Tusk at the European Council in Brussels, Belgium, on Thursday.

Photo: EPA-EFE

The EU Commission on Thursday sharply cut its forecasts for economic growth in the eurozone this year and next because of an expected slowdown in the largest countries of the bloc caused by global trade tensions and growing public debt.

In its quarterly economic forecasts, the EU’s executive arm also revised down its estimates for inflation in the 19-country currency bloc next year, which now is expected to be lower than forecast by the European Central Bank (ECB) — likely complicating the bank’s plans for an interest rate hike this year.

The commission projected that eurozone growth would slow to 1.3 percent this year from 1.9 percent last year, and is expected to rebound next year to 1.6 percent.

The new estimates are less optimistic than the commission’s previous forecasts, released in November last year, when it expected the eurozone to grow 1.9 percent this year and 1.7 percent next year.

Growth in the 27-nation EU — without Britain, which is planning to leave next month — is expected to slow to 1.5 percent this year from 2.1 percent last year.

Next year, the bloc is forecast to expand by 1.8 percent.

All EU member states are poised to continue growing, with the bloc expected to post its seventh consecutive year of expansion, but the larger member states would brake significantly, the commission said.

In Germany, the EU’s largest economy, growth is expected to slow to 1.1 percent this year from 1.5 percent last year. The commission had previously forecast 1.8 percent growth for this year.

France, Italy, Spain and the Netherlands are also forecast to reduce the pace of their expansion, with Italy expected to be the slowest economy in the whole bloc with a mere 0.2 percent growth this year.

The commission cited global trade tensions and China’s slowdown as the main drags for the EU’s economy. However, it also mentioned renewed concerns on debt sustainability, mostly in Italy, as a cause for the slowdown as Rome passed a free-spending budget forecast to have limited effects on growth.

The economic slowdown forecast by the commission is worse than that seen by the ECB in its latest projections released in December last year, when the bank expected the eurozone to grow by 1.7 percent this year.

The commission also expects eurozone inflation to be at 1.4 percent this year, below ECB estimates of 1.6 percent, and further away from the bank’s target of a rate close to 2 percent.

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