- Winter 2018 Interim Economic Forecast finds solid and lasting growth rates
- Core inflation outlook remains subdued
- Risks to growth forecast remain broadly balanced
Stockholm (Ekonamik) – At its February 11 meeting, the second of 2019, the Eurogroup discussed the Winter 2018 Interim Economic Forecast, which is based on a set of technical assumptions concerning exchange rates and commodity prices with a cut-off date of end January 2018.
The Interim Economic Forecast found a “solid and lasting expansion,” with growth rates for the euro area and the EU beating expectations as the transition from economic recovery to expansion continued. The euro area and EU economies were both estimated to have grown by 2.4% in 2017, the fastest pace in a decade. The performance, according to the forecast, was set to continue in 2018 and 2019 with growth of 2.3% and 2.0% respectively in both the eurozone and the EU.
Growth was likely to remain solid as a result of both stronger cyclical momentum in Europe, where labour markets continue to improve and economic sentiment is high, and a stronger than expected pick-up in global economic activity and trade. The growth forecasts for 2018 and 2019 were raised since November for both the euro area and EU economies, from 2.1% to 2.3% in 2018 and 1.9% to 2.0% in 2019.
The core inflation outlook (which excludes volatile energy and unprocessed food prices) was expected to remain subdued, with the labour market slack receding only slowly and wage pressures remaining contained. Headline inflation will continue to reflect the significant influence of energy prices and is forecast to rise modestly. Inflation in the eurozone reached 1.5% in 2017, and was forecast to remain at 1.5% in 2018 and increase to 1.6% in 2019.
Risks to the growth forecast remain broadly balanced. Economic growth could exceed expectations in the short terms as indicated by the high level of sentiment. In the medium term, high global asset prices could be vulnerable to a reassessment of risks and fundamentals. Downside risks related to the uncertain outcome of Brexit negotiations remain, as do those associated with geopolitical tensions and a shift towards more inward-looking and protectionist policies.
Image: Eurogroup President Mario Centeno at a Press Conference discussing the Eurogroup’s findings, February 11 2019. Source: consilium.europa.eu