Euro Area’s Economy Stays on Growth Track
The euro area’s economy will grow by 0.4 percent respectively in Q3 and Q4 2018 and Q1 2019, according to the three economics institutes ifo (Munich), ISAT (Rome) and KOF (Zurich). This represents a continuation of developments seen in the first two quarters of 2018.
Researchers now expect overall growth of 2.0 percent for 2018 and an inflation rate of 1.8 percent. Growth will be driven by investments, which will increase by 0.7 percent respectively in the last two quarters of 2018 thanks to favourable financing conditions; and by 0.6 percent in Q1 2019. This will push the growth rate up to 3.2 percent for 2018. Rising energy prices will boost the annual inflation rate to 2.1 percent in both of the last quarters of 2018. Inflation will subsequently edge downwards to 2.0 percent in Q1 2019.
Researchers see the aggressive trade policy pursued by the USA as a risk. Although US aggression is currently focused on China, Canada and Mexico, it may have a negative impact on world trade as a whole. Further interest rate increases by the US Fed constitute another potential risk. This could lead to a widespread currency crisis in emerging economies, which are exposed to a higher risk of contagion thanks to the turmoil in Argentina and Turkey.
Eurozone Economic Outlook
This quarterly publication is prepared jointly by the German external page ifo Institute, the KOF Swiss Economic Institute, and the Italian external page Istat Institute. The forecast results are based on consensus estimates building on common macroeconomic forecast methods by the three institutes. Details and graphs can be found in the right column.