The European Commission maintained its economic forecast for 2020 and 2021, whilst cautioning a number of eurozone member states could see slower growth.

GDP would remain at 1.2% this year for the 19 countries within the eurozone according to the Commission, which would continue until 2021.

As per a City AM report, the EU executive stated that although the phase one trade deal between the U.S. and China has eased risks to a degree, the coronavirus outbreak was now the principal threat to the economic growth forecast, with Germany’s economy especially at risk.

In regard to the coronavirus outbreak's potential impact, "the baseline assumption is that the outbreak peaks in the first quarter, with relatively limited global spillovers," the EC said. 

"The duration of the outbreak, and of the containment measures enacted, are a key downside risk. The longer it lasts, the higher the likelihood of knock-on effects on economic sentiment and global financing conditions."

GDP growth in Germany fell to 0.6% last year and is forecast to rally to 1.1% this year. That said, the Commission cautioned that Germany was “particularly exposed” to the impact of the coronavirus outbreak.

In addition, economic growth in Belgium is predicted to fall to 1.2% in 2020, from last year’s figure of 1.9%, and decline to 1% in 2021.

The European Commission also expects France’s economic growth to drop to 1.1% this year, from 1.2% in 2019.

In contrast, economic growth in Italy is forecast to rise slightly to 0.3%.

Furthermore, the Commission added that inflation throughout the euro area is forecast to speed up due to potentially higher oil prices and the impact of higher wages through to core prices.

Forecasts for consumer price growth for the eurozone increased to 1.3% in 2020 and 1.4% in 2021, compared to the 1.2% and 1.3% respective figures predicted last November.

 

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