Autumn 2019 Economic Forecast: A challenging road ahead
date: 07/11/2019
Labour markets remain strong and unemployment continues to fall. However, the external environment has become much less supportive and uncertainty is running high. This is particularly affecting the manufacturing sector, which is also experiencing structural shifts. As a result, the European economy looks to be heading towards a protracted period of more subdued growth and muted inflation. Euro area gross domestic product (GDP) is now forecast to expand by 1.1% in 2019 and by 1.2% in 2020 and 2021. Compared to the Summer 2019 Economic Forecast (published in July), the growth forecast has been downgraded by 0.1 percentage point in 2019 (from 1.2%) and 0.2 percentage points in 2020 (from 1.4%). For the EU as a whole, GDP is forecast to rise by 1.4% in 2019, 2020 and 2021. The forecast for 2020 was also revised down compared to the summer (from 1.6%). Persisting trade tensions between the US and China and high levels of policy uncertainty, especially with respect to trade, have dampened investment, manufacturing and international trade. With global GDP growth set to remain weak, growth in Europe will depend on the strength of more domestically-oriented sectors. Domestic growth drivers alone are unlikely to be sufficient to power strong growth, however.