The European Commission has slashed its growth forecasts for the euro area for this year and next and warned of ‘growing headwinds.’
In its newest Autumn forecasts released on Thursday, the Commission expected the euro area economy to expand 1.1 percent this year, down from 1.2 percent estimated in July, and to record a growth of 1.2 percent in 2020, compared to previous projections of 1.4 percent expansion.
Europe is facing ‘increasingly strong headwinds’, most notably trade war, Brexit, and structural changes in the car industry, warned Commissioner Pierre Moscovici.
“Tariff threats, rising geopolitical tensions, the unknown features of Brexit, the persisting weakness of manufacturing and several structural factors have conspired to ensure a prolonged period of high uncertainty that is keeping a lid on economic growth,” the report revealed.
Germany, Europe’s biggest economy would grow 0.4 percent this year, down from previous forecasts of 0.5 percent. In 2020, the GDP will accelerate to 1 percent, which is also beneath July’s forecasts of 1.4 percent.
While France and Italy also got their GDP projections revised down, U.K.’s 2020 growth was upgraded to 1.4 percent this year (previous 1.3%), while the 2019 estimates were held at 1.3 percent.
A ‘disorderly’ Brexit could dampen economic growth, particularly in the UK, but also in the EU27, though to a minor extent, the Commission said.
As of 11:12 GMT, the euro traded higher versus
the U.S. dollar at 1.1088, set for its first daily advance in four sessions.