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Worse Economic Outlook For Euro Zone Due To Uncertain US Trade Attitude

Worse Economic Outlook For Euro Zone Due To Uncertain US Trade Attitude
The forecast of growth for the next year for the euro zone economy was lowered by the European Commission on Wednesday. The commission cited the lurking uncertainty related to the United States trade policy was amongst the major risk for the economy of the region.
The estimate for inflation in the bloc was also lowered by the European Union’s executive arm in its quarterly economic forecasts. In its reviewed forecast, the commission predicted that the inflation for next year would not be close to the target set by the European Central Bank and expected it to be close to but lower than 2 per cent.
The executive arm of the EU also confirmed its prediction for the economic growth of the euro zone for the current year at 1.2 per cent from the 1.8 per cent touched by it in 2018. The growth for next year has also been reduced by the commission which is now pegged at 1.4 per cent compared to the forecast of 1.5 per cent made by it in May.
The commission said that there has been an increase in the risks for the bloc and most of the risks emanate from “the elevated uncertainty” over what the trade policy of the United States would be with respect to the EU because the Trump administration has threatened its major trading partner – the EU, with tariffs on a large range of products exported from Europe. 
The commission said that the downward revision of inflation was partly because of the weaker economic outlook and cut its forecast to 1.3 per cent for this year and next from the 1.4 per cent that had been previously made by it for both the years.
The projection of the Commission also tallies with that from the ECB. However the estimate issued by the Commission for 2020 is lower than the 1.4 per cent rate forecast made by the European central bank in its latest projections that was released by its in June. This can prompt the ECB to push for a policy of supporting fresh stimulus for the EU economy.
Slower growth in Germany, the euro zone’s largest economy, and Italy, its third largest were mostly responsible for the economic slowdown in the euro zone, the commission confirmed. The commission had predicted earlier, growth is expected to return to 1.4 per cent next year which would be less than the 1.5 per cent that had been predicted by the commission still earlier.
The commission also predicted that Italy would clock the worst growth rate in the whole 28-country EU as it kept the country’s growth forecast unchanged. It expects Italian growth to accelerate to 0.7 per cent but would still be the slowest in the EU.
The growth forecast for the United Kingdom was also kept unchanged by the commission with a growth forecast of 1.3 per cent for the current year as well as for the next year.

Christopher J. Mitchell

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