The recent slowdown in global growth and world trade, together with high uncertainty about trade policies, is weighing on prospects for Gross Domestic Product (GDP) growth in 2019 and 2020. The continued weakness of the manufacturing sector also plays a role, especially in those countries encountering specific problems in the automobile industry.
Despite that, the European economy is forecast to continue expanding for the seventh year in a row in 2019, with real GDP expected to grow in all EU Member States. As global uncertainties continue to weigh, domestic dynamics are set to support the European economy. Growth is expected to gather pace again next year.
GDP slowdown to bottom out in 2019
As global trade and growth are expected to remain weaker this year and next compared to the brisk pace seen in 2017, economic growth in Europe will rely entirely on domestic activity. More Europeans are now in work than ever and employment growth is expected to continue, albeit at a slower pace. This, together with rising wages, muted inflation, favourable financing conditions and supportive fiscal measures in some Member States, is expected to buoy domestic demand. All in all, GDP is forecast to grow by 1.4% in the EU this year and 1.2% in the euro area.
Valdis Dombrovskis, Vice-President for the Euro and Social Dialogue, also in charge of Financial Stability, Financial Services and Capital Markets Union, said: “The European economy is showing resilience in the face of a less favourable external environment, including trade tensions. Risks to the outlook remain pronounced. On the external side, these include further escalation of trade conflicts and weakness in emerging markets, in particular China. In Europe, we should stay alert to a possible ‘no-deal Brexit’, political uncertainty and a possible return of the sovereign-bank loop.”
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, said:“The European economy will continue to grow in 2019 and 2020. Growth remains positive in all our Member States and we continue to see good news on the jobs front, including rising wages. This means that the European economy is holding up in the face of less favourable global circumstances and persistent uncertainty. Nonetheless, we should stand ready to provide more support to the economy if needed, together with further growth-enhancing reforms. Above all, we must avoid a lapse into protectionism, which would only exacerbate the existing social and economic tensions in our societies.”
Via European Commission