Eurozone Economic Outlook: Q2 2019 Growth Momentum Lost with Worsening Trade Outlook

June 2019

The Eurozone outlook has deteriorated significantly since the end of 2018. Real GDP growth forecasts have been downgraded to 0.9-1.5% in 2019 and 0.9-1.9% in 2020, compared to 1.8% in 2018. The Eurozone slowdown started in mid-2018, mainly in the manufacturing sector, which contracted at the end of the year and is still stagnating at the beginning of 2019. The worsening global trade environment has been the main factor in the slowdown.

USD 570
Request More Information

Growth momentum lost with worsening trade outlook

The Eurozone outlook has deteriorated significantly since the end of 2018. GDP growth forecasts have been downgraded to 0.9-1.5% in 2019 and 0.9-1.9% in 2020, compared to a 1.8% growth rate in 2018. This is close to long-term trend growth of 0.7-1.7%.

Q1 2019 GDP growth was slightly better than expected at 1.2% year on year (0.4% quarter on quarter), suggesting that the slowdown has bottomed out. However, any previous recovery dynamics from the global financial and Eurozone crises have disappeared in the latest forecasts.

The Eurozone slowdown started in mid-2018, mainly in the manufacturing sector which contracted at the end of the year and is still stagnating at the beginning of 2019.

Relative to the fast 2.5% growth in 2017, the worsening global trade environment has been the main factor in the slowdown. The contribution of net exports to GDP growth is estimated to have declined by one percentage point since 2017, with European Commission forecasts for export growth in 2019 of 2%, around three percentage points below the 2017 level. From this perspective, without the unusually strong global demand environment in 2017 and early 2018, the growth slowdown would have simply occurred earlier.

Baseline Outlook

Growth momentum lost with worsening trade outlook (1)
Germany and Italy forecasts severely downgraded

Forecast Risks

Eurozone economy vulnerable to global downturn, Brexit risks delayed
Most likely pessimistic and optimistic scenarios

Business and financial conditions

Eurozone private sector sentiment has declined to two-year low
Monetary policy has loosened, interest rates have declined

Consumption and LABOUR MARKETS

Consumption growth has slowed down, despite higher employment
Low labour compensation growth ? Low income and consumption growth
Share:

NEW REPORT GUARANTEE

If you purchase a report that is updated in the next 60 days, we will send you the new edition and data extract FREE! Home Page