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The EU slashed its growth forecasts for the euro zone Thursday, saying global trade tensions are set to weigh on the region and limit economic expansion.
The warning from the EU’s executive arm, the European Commission, comes at time when the European Central Bank (ECB) has started a new round of stimulus to prop up fragile growth.
“The fact that growth is no longer expected to rebound meaningfully in the next two years is a major shift compared to previous forecasts and is based on the assessment that many features of the global slowdown will be persistent,” the European Commission said Thursday in its Autumn Economic Forecasts report.
“Most importantly, the surge in trade tensions and record-high uncertainty about trade policies is likely to have inflicted lasting damage to world trade,” the Commission added.
Uncertainties surrounding trade include: The future relationship between the U.K. and the EU as both need to establish new trading rules post-Brexit; new consumer preferences in the car industry and volatility in U.S.-China trade.
As a result, the Commission slashed its economic forecasts for the euro zone in 2019 and 2020. The 19-member region is now set to grow at a pace of 1.1% this year and 1.2% in 2020. In its previous forecasts, out in May, the European Commission had estimated a 1.2% growth rate for the euro zone in 2019 and 1.5% for 2020.
