Eurozone Economic Outlook: Q4 2018

Lost momentum and declining private sector confidence

The outlook for the Eurozone has continued to deteriorate since August. GDP growth declined to 1.7% year-on-year in Q3 of 2018.

The deterioration of the global demand and trade outlook since 2017 has dampened prospects for exports, increasing the reliance on slowing domestic demand for growth. However, consumption growth has been relatively slow, at 1.2% year-on-year in Q3 of 2018.

Private sector confidence indices have declined, although they remain above the historical average.

Recent declines in Eurozone stock markets also signal significant uncertainty about the region’s economic outlook.

GDP growth is forecast to increase by 1.9-2.1% in 2018. Afterwards, output is expected to rise by 1.4-2.2% in 2019 and by 1.1-2.1% in 2020. Growth in 2021-2026 is likely to stay within an average annual rate of 0.8-1.8%, due to slow labour productivity growth and an ageing population constraining employment growth. Baseline scenario probability: 20-30% at 1-year horizon.