Eurozone Economic Outlook: H2 2019 Weak Growth and Increasing Downside Risks

Growth outlook remains below average

Eurozone GDP is predicted to increase by 1.0-1.4% in 2019 and by 0.8-1.7% in 2020. Eurozone Q1 2019 GDP growth was better than expected, at 0.4% quarter-on-quarter, but this mainly reflected temporary factors, including a mild winter and a rebound in car production. Growth slowed down again in Q2, to 0.2% quarter-on- quarter.

The growth outlook remains below average, mainly due to the worsening in global trade and in manufacturing sector conditions.

Manufacturing output, in particular, has contracted in 2019. Domestic demand and service sector conditions have been stronger.

Consumption and fixed investment growth remain slightly above long-term trends, with supporting factors including above average consumer confidence, and continuing employment and income growth. However, business investment growth is expected to decline more significantly due to the worsening global demand/trade outlook.

Baseline forecast probability: 20- 30% at one-year horizon.