U.S. Ambassador to Germany Richard Grenell discusses American trade with the European Union.
Trade uncertainties and a slowdown in manufacturing could cause Europe’s economy to grow at the slowest pace in six years, the International Monetary Fund warned on Wednesday.
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The Washington-based organization said in its latest Regional Economic Outlook report that growth in the 19-member eurozone will fall to 1.4 percent in 2019, down from 2.3 percent one year ago, before rebounding slightly to 1.8 percent in 2020.
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In the continent’s most advanced economies, growth dropped by 0.1 percentage point to 1.3 percent in 2019, while emerging Europe remained a bright spot, with growth revised up by 0.5 percentage point to 1.8 percent. That’s because in several of the countries, sluggish trade and manufacturing, combined with heightened trade and Brexit-related uncertainty, have started to rattle investors.
Despite this, private consumption and the services sector remained resilient, boosted by a strong labor market as both employment and wage growth remain solid.
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Given the dire situation, a “synchronized fiscal response, albeit appropriately differentiated across countries, could become suitable,” the IMF said in its report.
“Monetary policy in many European countries should remain accommodative given subdued inflationary pressures and slowing economic activity,” the organization said. “At the same time, keeping interest rates low for long can create financial sector vulnerabilities, which need to be carefully monitored.”
The U.S. remains one of the few countries without a dark outlook: In October, the IMF forecast the American economy will expand by 2.1 percent next year.
