After five straight quarters of vigorous expansion, the European Commission has cut its growth forecast for the Eurozone for the remainder of 2018, as trade turbulence is moderating the bloc’s economic momentum.
According to the Summer Interim Economic Forecast that was published on July 12, the Eurozone is expected to grow 2.1% this year and 2% in 2019, which is a reduction from the previous estimate of 2.3% and underlines the Eurozone struggles stemming from ongoing trade tensions with the US after President Donald J. Trump opted to target key EU exports.
The European Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said the downward revision was due to external factors regarding the effects of the trade situation with the US and high oil prices.
“The slight downward revision, compared to the spring, reflects the impact on the confidence of trade tensions and policy uncertainty as well as rising energy prices,” said Moscovici.
Inflation currently stands at a 1.9% for the EU as a whole and 1.7% for the 19 Member States that are part of the Eurozone
Moscovici noted that the forecast is based on maintaining the status quo and that further barriers to trade could still lower growth this year.
“Our forecast is for a continued expansion in 2018 and 2019, although a further escalation of protectionist measures is a clear downside risk. Trade wars produce no winners, only casualties. However, growth in Europe is set to remain resilient, as monetary policies stay accommodative and unemployment continues to fall,” he added.
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— Pierre Moscovici (@pierremoscovici) July 12, 2018
Spain is set to grow by 2.8% in 2018, up slightly at 0.1% from the spring forecast, but the EU’s fourth-largest economy will experience a deceleration in 2019 to 2.4% thanks to strong private consumption and construction investments.
The UK’s growth will slow to 1.3% for 2018, down 0.2%, which marks the British economy as one of the slowest in the EU ahead of Britain’s March 2019 voluntary withdrawal from the European Union.