EC slashes European growth forecasts
The European Commission has cut its forecasts for economic growth across the continent's major economies, even before taking into account the potential for further drags from Brexit and a China slowdown.
The EC on Thursday cut its 2019 gross domestic product growth estimate for the European Union to 1.5% in 2019 and 1.7% in 2020 from autumn forecasts of 1.9% and 1.8% respectively.
Italy's growth forecast was slashed to just 0.2% for the current year, the slowest across the region's members, with Germany in second-bottom place with growth of 1.1%. The UK and France are both expected to grow 1.3%.
For the eurozone, the GDP forecast for 2019 was cut to 1.3% from 1.9%, and for 2020 to 1.6% from 1.7%.
After its 2017 peak, Pierre Moscovici, commissioner for economic and financial affairs, said the deceleration of the EU economy is set to continue, with the slowdown set to be more pronounced than expected last autumn "due to global trade uncertainties and domestic factors in our largest economies".
Commissioner Valdis Dombrovskis, in charge of financial stability, financial services and capital markets union, said the forecast was revised downwards, in particular for the largest euro area economies, reflecting "external factors, such as trade tensions and the slowdown in emerging markets, notably in China".
He added: "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."
Separately, Germany’s DIHK business association hacked down its outlook for 2019 to 0.9%, after forecasting 1.7% in the autumn.
On Thursday morning German published industrial production figures showing a 0.4% decline in December, below the published consensus forecast of a 0.7% increase. IP was 3.9% below its level a year earlier.
Economists said this added to the evidence that the economy may have declined in the fourth quarter.
The gloomier forecasts reflect more pronounced weakness in the region, which stumbled at the end of 2018 as political instability continued to rock Italy, violent protests in France depressed output, and Germany’s car industry struggled to rebound from changes in regulation. Global trade uncertainty and a sharper-than-expected slowdown in China also pose external risks to the economic outlook.