Autumn forecast: Sustained growth amid high uncertainty

Photo: EPA Valdis Dombrovskis (R) and Pierre Moscovici (L).

Growth both in the Eurozone and EU-27 is set to ease from a 10-year high in the next few years, according to the Commission's Autumn forecast released last Thursday. Eurozone growth is expected to be 2.1% in 2018 before moderating to 1.9% in 2019 and 1.7% in 2020. The same pattern is expected for the EU27, with growth forecast at 2.2% in 2018, 2.0% in 2019 and 1.9% in 2020.

Last year's exceptionally benign global situation helped to underpin strong economic activity and investment in the EU and the Eurozone. Despite a more uncertain environment, all Member States are forecast to continue growing, though at a slower pace, thanks to the strength of domestic consumption and investment. Barring major shocks, Europe should be able to sustain above-potential economic growth, robust job creation and falling unemployment. However, this baseline scenario is subject to a growing number of interconnected downside risks.

“All EU economies are set to grow this year and next, which will bring more jobs. However, uncertainty and risks, both external and internal, are on the rise and start to take a toll on the pace of economic activity. We need to stay vigilant and work harder to reinforce the resilience of our economies,” VP Valdis Dombrovskis said. “The European economy is holding up well, with growth easing gradually. We project this pattern will continue over the next two years, as unemployment continues to fall to levels not seen since before the crisis,” Economy Commissioner Pierre Moscovici added.

Rising global uncertainty, international trade tensions and higher oil prices will have a dampening effect on growth in Europe, according to the forecast. Following years of robust employment growth, the prospect of a slowdown in labour market improvements and of increasing supply side constraints in some Member States could also add to this dampening effect.

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