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EC cuts eurozone 2020 growth forecasts on trade tensions

EC cuts eurozone 2020 growth forecasts

The European Commission (EC) lowered its estimate of the eurozone economic growth for 2020, but kept this year's outlook unchanged, while inflation slashed forecasts.

In its quarterly economic outlook, the European Commission decided to keep the euro-area GDP growth estimates for 2019 at 1.2 percent, which was expected in the Commission’s spring forecasts.

However, it reduced growth prospects for 2020 slightly to 1.4 percent, instead of 1.5 percent predicted in the spring estimates.  

The EC has raised the downside risks to global economic growth given the prolonged trade standoff between the United States and China, as well as the U.S. threats of punitive tariffs on a wide range of EU products.

The economic slowdown in the eurozone was mostly caused by poor growth in Germany, the largest economy in the eurozone, and Italy, the third largest economy in the 19-nation region, the commission said.

The outlook for economic growth in Germany remained stable in the current year at 0.5 percent, but the European Commission lowered the estimates by the largest European economy by 2020 to 1.4 percent, instead of 1.5 percent expansion.

Within the state preparing for the implementation of the Brexit, the European Commission has kept the United Kingdom's economic growth estimates at 1.3 percent in the current and next year.

EC slashes inflation projections

Regarding inflation, the EU's executive arm said the prices would grow lower than expected, pushing the inflation rate beyond the ECB's goal of close to 2%.

Euro area inflation forecast was set at 0.1 percent lower for the years 2019 and 2020 at 1.3 percent on the back of the lower oil prices and weaker economic prospects.

According to Pierre Moskovici EU economic Commissioner that fears of increased trade tensions "could also trigger a shift in global risk sentiment at times when valuations appear stretched across many asset classes," adding that this "could lead to rapid tightening of global financial conditions."

As of 13:40 GMT, the euro was 0.37 percent up at 1.1248 versus the green currency, looking for its first daily gain in four sessions.

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