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EU Slashes Eurozone Growth Forecasts, Sees Slowing Inflation

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The European Commission slashed the euro area growth forecasts for this year and next, citing a high level of uncertainty and downside risks to the outlook.

In its winter economic forecast, the executive arm of the EU cut the Eurozone growth forecast for this year to 1.3 percent from 1.9 percent.

The growth projection for next year was trimmed to 1.6 percent from 1.7 percent.

Growth in both the euro area and the EU28 likely slowed to 1.9 percent in 2018 from 2.4 percent in 2017, the EU said. The earlier projection for 2018 expansion for both regions was 2.1 percent.

"This slowdown is set to be more pronounced than expected last autumn, especially in the euro area, due to global trade uncertainties and domestic factors in our largest economies," EU Economic Affairs Commissioner Pierre Moscovici said.

"Europe's economic fundamentals remain solid and we continue to see good news particularly on the jobs front."

All member states are set to grow this year. Downward revisions for growth in 2019 were sizeable for Germany, Italy, and the Netherlands.

The German growth forecast for this year was slashed to 1.1 percent from 1.8 percent and the projection for next year was left unchanged at 1.7 percent.

Italy's growth forecast for this year was cut to 0.2 percent from 1.2 percent and the outlook for next year was slashed to 0.8 percent from 1.3 percent.

The Dutch growth projection for this year was lowered sharply to 1.7 percent from 2.4 percent and that for next year was cut to 1.7 percent from 1.8 percent.

The EU expects Eurozone inflation to ease to 1.4 percent this year from 1.7 percent last year, thanks to lower oil prices. Price growth is expected to pick up to 1.5 percent in 2020.

Previously, inflation for 2019 was forecast at 1.8 percent and that for 2020 was projected at 1.6 percent.

Trade tensions, the China slowdown, global financial stability risks and Brexit were among the uncertainties listed by the EU.

"Risks remain substantial and mainly stem from potential policy mistakes across the globe," the report said.

"Temporary factors currently holding back growth could turn out to be more lasting than expected," the EU said.

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