Growth forecasts cut for the euro zone

THE EUROPEAN Commission yesterday cut its forecasts for the euro zone’s economic growth this year, citing among the top causes for its revision trade tensions with the US and rising oil prices, which push the bloc’s inflation higher.

The slowdown of the euro zone economy is set to affect all major economies of the bloc, but is expected to hit Italy harder, as the country will record the lowest growth rate in Europe, matched only by Britain among all 28 EU countries.

The EU executive estimated the 19-country euro zone will grow by 2.1 percent this year, lower than the 2.3 percent gross domestic product (GDP) increase it had forecast in its previous estimates released in May, and further below the 2.4 percent growth recorded last year.

In 2019 the bloc’s growth should further slow to 2 percent, unchanged from the previous forecast.

“The downward revision of GDP growth since May shows that an unfavourable external environment, such as the growing trade tensions with the US, can dampen confidence and take a toll on economic expansion,” EU commission’s vice-president Valdis Dombrovskis said. Trade disputes The negative impact of trade disputes on the European and global economy are expected to be much bigger in case of escalation, the EU economics commissioner Pierre Moscovici said.

“Trade wars produce no winners, only casualties,” he stressed.

Rising oil prices have also contributed to the slowdown, the commission said, and are expected to push euro zone’s inflation up to 1.7 percent this year and next, from the previously estimated 1.5 percent in 2018 and 1.6 percent in 2019.

Germany and France, the two largest economies of the euro zone, are expected to lose steam this year and next.

Germany’s GDP expansion will slow to 1.9 percent this year and in 2019 from the previously estimated 2.3 percent in 2018 and 2.1 percent in 2019. It grew 2.2 percent last year.

France’s economy will grow 1.7 percent this year and next, much below the 2.2 percent growth it experienced last year.

The new estimates are also less optimistic than the 2 percent growth the commission had earlier forecast for this year and also slower than the 1.8 percent growth previously forecast for 2019.

The slowest-growing economy of the bloc will remain Italy, which is expected to grow only 1.3 percent this year, less than the 1.5 percent estimated in May.