European Commission Cuts Growth Forecast for Euro Zone as Trade Tensions Rise

Investing.com – The European Commission lowered its growth forecast for the euro zone in the coming years on Thursday, citing international trade and geopolitical tensions and rising oil prices.

The Commission expects growth in the euro area to moderate from the 10-year high of 2.4% seen in 2017 to 2.1% this year and then further decline to 1.9% in 2019, compared to its prior projection of a 2.0% expansion.

“Fading world trade growth, rising uncertainty and higher oil prices should have a dampening effect on growth in general, while economic activity should also weaken as labor market improvements slow, slack diminishes, and supply side constraints become more binding in certain Member States,” the Commission explained in the report.

“The extraordinary impulse from the rebound in global growth and trade enjoyed by the European economy last year is already wearing off, as the outlook for global growth is weakening and trade tensions have risen,” it added.

While the projected slowdown may be of concern to the European Central Bank as it winds down its asset purchase program at the end of the year, the Commission did lift inflation expectations to 1.8% for 2018 and 2019 from its prior estimate of 1.7% for both years.

The economy of the wider European Union is expected to growth by 2.2% this year, slowing to 2.0% in 2019 and 1.9% in 2020.

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