Trade tensions push down eurozone economic forecast

Despite the revision, the bloc’s economy has expanded for seven years in a row, says Commission.

The European Commission today downgraded its eurozone economic forecasts for 2019 again amid “prominent” concerns of continued global trade tensions and China’s expected slowdown.

The downward revision follows a similar move in February, when Brussels expected eurozone growth of 1.3 percent of economic output this year — 60 basis points, or 0.6 percentage points, less than its November forecast.

Today the Commission said that it expects the currency area’s gross domestic product to reach 1.2 percent this year. That figure should increase to 1.5 percent next year.

Pierre Moscovici, the Commission’s chief for economic and financial affairs, highlighted that, despite the revision, the bloc’s economy has expanded for seven years in a row.

“The European economy is holding up in the face of less favorable global circumstances and persistent uncertainty,” the Frenchman said in a statement. “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,” he added.

Brussels also tweaked its inflation prediction down to 1.4 percent for 2019 and 2020. In February, it had forecast 1.5 percent inflation for the 19 eurozone countries for next year. The price indicator stood at 1.4 percent in the first quarter of this year.

On a positive note, the EU’s debt-to-GDP ratio is expected to fall to 80.2 percent this year from 81.5 percent in 2018. That decline is set to continue to 78.8 percent in 2020.

But that drop is no thanks to Italy. The Commission predicted its government debt will increase to 133.7 percent this year from 132.2 percent. That trend is set to reach 135.2 percent in 2020.

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