European Commission raises 2019 economic growth forecast to 2.8 percent

Commission cuts euro zone growth forecasts for 2019

The European Commission cut its eurozone growth forecast for 2019 on Tuesday, with overspending by populist-run Italy again a concern.

Pierre Moscovici, European commissioner for economic and financial affairs, told CNBC Tuesday that the fundamentals of European economies were still solid.

More Europeans are employed now than ever, and employment growth is expected to continue, albeit at a slower pace.

The recent slowdown in global growth and world trade, together with high uncertainty about trade policies, is weighing on prospects for GDP growth in 2019 and 2020.

In its winter outlook, the Commission had lowered Estonia's 2019 economic growth forecast by 0.1 percentage points to 2.7 percent; however in its spring outlook, the economic growth forecast was raised back to 2.8 percent, while leaving next year's growth estimate unchanged at 2.4 percent. Government debt is expected to fall from 58% of GDP in 2019, to 56% in 2020.

"The uncertainty surrounding Ireland's economic outlook comes mainly from external factors, particularly the terms of the UK's withdrawal from the European Union, as well as possible changes in the worldwide taxation and trade environment", the Commission said.

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Unemployment in the 19 countries sharing the euro is to fall to 7.3% next year from 7.7% expected this year.

Even so, the economy will still rank in the premier league of the eurozone, beaten only by Malta's 5.5pc growth rate this year and in a tie with Slovakia.

Germany expects the EU Commission for 2019 with growth in the gross domestic product (GDP) by 0.5 percent.

The EU also warned that accommodative USA monetary policy at times when the economy is at full employment risks exacerbating imbalances and vulnerabilities, "especially as some asset valuations appear to be stretched and debt levels continue to rise". Household consumption remains strong as disposable incomes continue to benefit from steady growth of employment and wages, in an environment of low inflation.

The EU's aggregate government deficit is expected to increase from 0.6 percent of GDP in 2018 to 1 percent in both 2019 and 2020.

He added: "In Europe, we should stay alert to a possible "no-deal Brexit", political uncertainty and a possible return of the sovereign-bank loop". On the external side, these include a further escalation of trade conflicts and weakness in emerging markets, particularly in China.

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