THE WIDER ECONOMY
The Euro Area projections presented in this chapter have been compiled from the EBF Spring 2019 Economic Outlook, a bi-annual report prepared by the European Banking Federation’s Chief Economists’ Group. European Commission data otherwise.
The Euro area economy will continue to expand, albeit close to potential for the time being
The slowdown in the pace of the economic growth within the 19-country bloc, begun in Summer 2018, will continue in 2019 largely due to weaker global economic conditions arising from multiple global challenges and uncertainties. A soft industrial sector performance in Europe and mixed economic activity by the largest Euro area economies have also influenced the growth pace.
Trade tensions, contained until last year, have started to take a toll on European export growth. If the US and China do not strike a deal, the situation for European exports may further deteriorate as this will likely lead to a slowdown in China’s economic growth which is a key market for EU exports. Europe’s export-oriented economy would also be severely hit if EU-US trade frictions materialise and US tariffs are imposed, for example, on EU automotive exports.
Stabilising impulses come from the strength of the domestic demand, benefitting from a stable and strong service sector. Private consumption remains the major growth driver benefiting from a continued strong labour market performance, higher real wage growth and supportive financing conditions.
Looking forward, a plausible slight gradual recovery in GDP growth is expected to begin in the second half of 2019, and further into 2020, supported mainly by a revitalisation of global trade, economic growth in China following policy stimulation, accommodative financial conditions and a rebound in economic activity in Europe, especially in Germany’s manufacturing sector.