EU Retains Eurozone Growth Projections, Cites Coronavirus As Key Downside Risk

eurozone july30 13feb20

The European Commission retained its growth outlook for the 19-nation currency bloc, but cited the outbreak of coronavirus as a key downside risk, after the 'Phase One' trade deal between the US and China reduced tensions to some extent.

In the winter forecast, the executive arm of the EU said the outbreak and spread of the '2019-nCoV' coronavirus and its impact on public health, human lives and economic activity has been a source of mounting concern. The duration of the outbreak, and of the containment measures enacted, are a key downside risk, the EU added.

According to the commission, the European economy remains on a path of steady and moderate growth. The agency forecast the euro area economy to grow 1.2 percent each this year and next, unchanged from the autumn forecast.

Meanwhile, on the back of supportive monetary policy, slightly higher oil price assumptions and some upward momentum in underlying price pressures, the inflation outlook for the currency bloc was revised upwards.

The 2020 inflation forecast was raised to 1.3 percent from 1.2 percent. Likewise, the projection for next year was lifted to 1.4 percent from 1.3 percent.

In Germany, real GDP growth is forecast to rebound somewhat to 1.1 percent in 2020. Growth is forecast to consolidate at 1.1 percent or above next year.

Spain's GDP growth forecast for 2020 and 2021 was revised up compared to the autumn forecast by 0.1 percentage points, to 1.6 percent and 1.5 percent, respectively.

France's GDP growth is set to decelerate to 1.1 percent in 2020 and recover to 1.2 percent in 2021.

Italy's real GDP growth is forecast to pick up only slightly to 0.3 percent in 2020, due to a negative carry-over effect, and to 0.6 percent in 2021. Downside risks to the growth outlook remain pronounced, the EU noted.

After UK's withdrawal from the EU, the British economic growth is expected to remain broadly stable at 1.2 percent in 2020 and 2021. Projections for 2021 are based on a purely technical assumption of status quo in terms of trading relations between the EU and the UK.

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