Economic Outlook

Euro area economy robust, but with low momentum

Kiel Institute Economic Outlook Euro Area, Nr. 58 (2019 | Q3)

The euro area economy is currently expanding at a moderate pace. The underlying momentum has slowed noticeably since early 2018, which is mainly attributable to lower external impulses and, subsequently, to an increasingly weakened industrial activity. Nonetheless, leading indicators point to further, albeit modest growth, and the economy is continuously supported by low interest rates and mild fiscal stimulus. In addition, foreign trade is set to moderately contribute to economic growth again, provided that Europe does not enter the focus of global trade conflicts, und under the assumption that a no-deal scenario for the United Kingdom can be avoided. As a result, gross domestic product is expected to increase by 1.2 percent in both 2019 and 2020; by 2021, production growth is expected to accelerate to 1.5 percent. The decline in the unemployment rate is likely to flatten noticeably, but it will nevertheless fall below its historical low of 2007. Consumer price inflation remains moderate and is likely to remain substantially below the central bank's target range.