By Maria Martinez
The European Union stuck to its outlook for subdued growth for the coming two years, amid risks from the potential effect of the coronavirus and persistent uncertainty surrounding U.S. trade policy.
Economic growth in the eurozone should continue on a path of steady, modest growth in 2020 and 2021 with tentative signs of stabilization in the manufacturing sector and a possible bottoming out of the decline in global trade, the EU said Thursday in its quarterly report.
Gross domestic product in the 19-member eurozone should grow 1.2% in both 2020 and 2021, the EU said, sticking to its forecasts from November.
"The euro area has now enjoyed its longest period of sustained growth since the euro was introduced in 1999," the EU said.
While some downside risks have faded with the phase-one trade deal between the U.S. and China and the avoidance of a no-deal Brexit, uncertainty remains in those fronts and new risks have emerged, particularly the coronavirus.
The baseline assumption is that the outbreak peaks in the first quarter, with limited global spillover, but the duration of the outbreak and of the containment measures are "a key downside risk," the EU said.
Continued employment creation, robust wage growth and a supportive policy mix should help the European economy maintain a path of moderate growth, with private consumption and investment fueling economic growth, according to the bloc's executive, the European Commission.
The economy remains on a steady path despite a challenging environment and eurozone member states "should use this weather window to pursue structural reforms to boost growth and productivity," said European Commission Executive Vice President Valdis Dombrovskis, who oversees economic policymaking.
Gross domestic product grew 1.2% last year, its weakest expansion since 2013, when the currency area was emerging from the financial crisis.
"The European economy could benefit from more expansionary and growth-friendly fiscal policies and enjoy positive spillovers from more benign financing conditions in some eurozone member states," the Commission said.
The EU increased its eurozone inflation forecast to 1.3% from 1.2% for 2020, and to 1.4% from 1.3% for next year.
"This reflects tentative signs that higher wages may start passing through to core prices and slightly higher assumptions about oil prices," the Commission said.
Write to Maria Martinez at firstname.lastname@example.org
(END) Dow Jones Newswires
February 13, 2020 05:00 ET (10:00 GMT)
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