Economic Outlook

Economic Assessment of the Euro Area: Winter 2019/2020

Authors

  • Gern
  • K.-J.
Publication Date

This EUROFRAME Report presents an assessment of the economic outlook for 2020 and 2021 focused on the euro area based on a synopsis of the forecasts of EUROFRAME institutes. Perspectives for UK and CEEs countries are also included. Overall, EUROFRAME institutes expect that growth in the euro area has bottomed, but growth is expected to accelerate only very gradually in the coming two years. On average, GDP is expected to rise by 1.1 per cent in 2020 and 1.3 per cent in 2021. Despite sluggish growth labour market conditions will improve further albeit at a diminished pace. The unemployment rate is expected to fall to 7.2 per cent in 2021, below the previous lows recorded in 2008.

The slowdown in the euro area economy last year was driven by a fall of manufacturing production. A closer look at developments in manufacturing and the spill-overs to other sectors is provided in the focus section of the report. It finds that the evolution of production differs strongly between countries with Germany particularly affected, that the rest of the economy generally remained on track supported by accommodative monetary conditions, low inflation and robust labor markets, and that indicators point to a gradual strengthening of .manufacturing output on the back of a slow improvement of confidence worldwide amid reduced trade tensions and expansionary policies.

Downward risks to the forecast have risen recently as new uncertainties emerged with the spreading of the Novel Coronavirus in and beyond China. The drastic measures implemented in China in order to contain the epidemic will have a significant negative impact on output in China in the first quarter, and there is a risk of a more sustained reduction of growth, including negative repercussions on world trade, resulting from this event.

Kiel Institute Expert

Info

Key Words

  • Brexit
  • Euro area
  • European Monetary Union
  • Industrial production
  • Wages