Euro-Area Economy to Pick Up Some Momentum
The euro-area economy will pick up some momentum, according to three research institutes: ifo in Munich, KOF in Zurich, and Istat in Rome. Economic growth will rise from its low rate of 0.2 percent in the third quarter of 2019 to 0.3 percent in the fourth quarter of 2019. The institutes expect the euro-area economy to continue to grow by 0.3 percent quarter on quarter in each of the first two quarters of the new year.
The main driver of this development is private household consumption, which will increase by 0.3 percent in each of the first and second quarters of 2020. Industrial production and investment will also pick up again over the same period, after a decline in the fourth quarter of 2019.
Prices will rise by about 1.0 percent in the fourth quarter of 2019, then 1.3 percent in the first quarter of 2020, and finally 1.2 percent in the second quarter. This is well below the European Central Bank’s inflation target of below, but close to, 2.0 percent.
The forecast is based on an oil price of USD 65 per barrel of crude oil and a EUR/USD exchange rate of 1.12.
While they are somewhat diminished, the risks to growth in the euro area remain: the US/China trade dispute and Brexit. Added to these, there are now strikes in France against President Emmanuel Macron’s pension reform and the tensions between the US and Iran.
Eurozone Economic Outlook
This quarterly publication is prepared jointly by the German external pageifo Institutecall_made, the KOF Swiss Economic Institute, and the Italian external pageIstacall_madet 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.
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