Eurozone Economic Forecast

Eurozone Economic Outlook

October 23, 2018

Incoming data suggests that the Eurozone economy continued to grow steadily in the third quarter, although the pace of growth has levelled off notably this year after a stellar 2017. A tightening labor market and accommodative monetary policy are driving a solid recovery, reflected by the unemployment rate falling to a fresh multi-year low in August. That said, a firm euro and slowdown in global trade are weighing on the region’s exports, while data for the manufacturing sector has also been weak. Although industrial production broke a string of contractions and returned to growth in August, the composite PMI edged down in September, which suggests that the improvement was short-lived. Meanwhile, politics continues to cloud the currency bloc’s economy. In October, Italy’s unconventional coalition government unveiled a costly populist budget, setting the country up for a clash with the European Commission as it breaks the country’s agreement to rein in the fiscal deficit. In addition, Brexit negotiations continue to drag on, with the latest round of talks in October failing to result in an agreement.

Eurozone Economic Growth

Less accommodative monetary policy and slower global trade are likely to drag on the Eurozone economy next year. Nevertheless, growth ought to remain solid thanks to buoyant investment and a healthy labor market. Rising global protectionism and turbulent internal politics remain the key risks to the bloc’s forecasts. FocusEconomics panelists project growth of 1.8% in 2019, which is unchanged from last month’s forecast, before decelerating slightly to 1.6% in 2020.

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Eurozone Facts

Exchange Rate1.130.65 %Nov 14
Stock Market1,112-0.52 %Nov 14

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