The European Commission dealt a blow to the markets, sharply lowering forecasts for economic growth
The European Commission lowered its growth forecast for all major eurozone economies and warned that Brexit and China's slowdown are threatening to worsen the outlook. The Commission believes that the economy of 19 European countries this year will grow by 1.3% compared with 1.9%, projected in November. In 2020, an increase of 1.6% is expected compared with the previously forecasted 1.7%.
The downward revision of Italy’s GDP was the sharpest: by 1 pp at once. to 0.2% for the whole of 2019. The Commission considered that growth would slow to 0.2%, the lowest in the Eurozone.
“We need to monitor the situation in Italy, taking into account the reduced growth prospects to 0.2%, which is very significant,” said EU Economic Commissioner Pierre Moscovici in an interview with Bloomberg.
The forecast for German GDP growth has been significantly lowered, now only 1.1% is expected from the largest Eurozone economy, unlike the 1.8% forecast in November.
"To a large extent, the loss of growth in the euro area can be attributed to weakening support from the external environment, including slower growth in world trade and high uncertainty regarding trade policy," the report says.
The European Commission also identified a number of internal factors that have had an important impact: social tensions, budget policy uncertainty in some countries, and the weakness of the automotive industry.
The achievement of the ECB medium-term goal of 2% for inflation in the zone is also delayed for the time being, for 2019, the target for price increases has been reduced to 1.4% against 1.8% in the previous forecast. In 2019, the growth rate is expected to 1.7%