Eurozone Economic Forecast

Eurozone Economic Outlook

December 20, 2018

Detailed data confirmed that broad-based malaise drove the Eurozone economy to slow notably in the third quarter, with growth recording the softest reading in four years. Notably, export growth contracted amid cooling global trade, while the industrial sector was also hurt as the automobile sector was disrupted by new emissions tests. Available data for the fourth quarter points to mixed momentum. In October, industrial production rebounded and the unemployment rate was stable. However, sentiment slid in November and the composite PMI plunged to a four-year low in December. In the political arena, European leaders agreed to make a common-budget for the Eurozone on 14 December, accepting a slimmed-down version of an idea touted by French President Emmanuel Macron. The budget would be used to spur investment and reduce economic disparity among economies and is a sign of renewed life in Eurozone reforms. Most of the difficult decisions regarding the budget, including its size, have yet to be agreed upon and a proper proposal is expected in June. The budget could face lengthy negotiations to pass given the differing views among heads of states over the matter.

Eurozone Economic Growth

A solid domestic economy should drive healthy growth next year. However, a less favorable external backdrop will weigh on the pace of expansion. The threats of rising global protectionism and turbulent internal politics are key risks to the Eurozone’s forecasts. The panel projects growth of 1.6% in 2019, which is down 0.1 percentage points from last month’s forecast, and 1.5% in 2020.

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Eurozone Facts

Exchange Rate1.140.65 %Jan 16
Stock Market1,067-0.52 %Jan 16

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