All Member States are forecast to continue growing, though at a slower pace, thanks to the strength of domestic consumption and investment
The European Commission published today its Autumn 2018 Economic Forecast. It covers the years 2018, 2019 and 2020 and includes data on gross domestic product growth, investment, employment, unemployment, inflation and general government gross debt for all 28 EU Member States.
According to the Commission's forecasts, growth in the euro area is forecast to ease from a 10-year high of 2.4% in 2017 to 2.1% in 2018 before moderating further 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 euro area. 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.
Labour market conditions continued to improve in the first half of 2018, with employment growth remaining steady even as economic growth cooled.
Job creation is set to continue to benefit from continued growth and structural reform implementation in some Member States. Unemployment should continue to fall but at a slower pace than in the past, as employment growth is eventually dampened by increasing labour shortages and slower economic growth.
Unemployment in the euro area is expected to fall to 8.4% this year and then to 7.9% in 2019 and 7.5% in 2020. In the EU27, unemployment is forecast at 7.4% this year before falling to 7% in 2019 and 6.6% in 2020. This would represent the lowest unemployment rate recorded since the start of the monthly unemployment series in January 2000.
Headline inflation is forecast to remain moderate over the forecast period. In the euro area, inflation is set to reach 1.8% in 2018 and 2019 and to slow to 1.6% in 2020.
According to the Commission's forecasts, the euro area's general government deficit is projected to continue declining relative to GDP this year, thanks to lower interest expenditure. This decline is set to come to a halt next year for the first time since 2009, as the fiscal stance turns slightly expansionary in 2019 before turning broadly neutral in 2020. The euro area's general government deficit is expected to increase from 0.6% of GDP in 2018 to 0.8% in 2019 and to decline to 0.7% in 2020. For the EU27, the general government deficit is expected to increase from 0.6% of GDP in 2018 to 0.8% in 2019 and to decline to 0.6% in 2020. Overall, the trend remains one of sizeable improvements compared to ten years ago, in 2009, where the deficit level peaked at 6.2% in the euro area, and at 6.6% in the EU.
Debt-to-GDP ratios are projected to continue to fall in the euro area and in almost all Member States, supported by debt-decreasing primary surpluses and continued growth. The euro area debt-to-GDP ratio is set to fall from 86.9% in 2018 to 84.9% in 2019 and to 82.8% in 2020, down from a peak of 94.2% in 2014. In the EU27, the general government debt ratio is set to fall from 80.6% of GDP in 2018 to 78.6% in 2019 and 76.7% in 2020.
8 November 2018