European growth ‘slower than expected’

7 Mar 19

Growth in Europe is slowing much more than expected as policy uncertainty continues – including over Brexit – and could pose a threat to the global economy, the OECD has warned.

Projections for GDP growth in the euro have been revised down to fall to 1% this year and 1.2% in 2020, from 1.8% in 2018, according to the OECD’s Interim Economic Outlook, published on Wednesday.

This is 0.8 percentage points lower than the OECD’s estimate just a few months ago in November.

Laurence Boone, OECD chief economist, said: “Growth in Europe has been particularly disappointing, as trade growth both within the EU and with external partners has stalled.

“What worries us is how much it [growth] is slowing in the euro area.”

Speaking at the organisation’s headquarters in Paris on Wednesday, she said the slowdown in growth was a result of trade, weak financial markets and high inflation resulting from policy uncertainty globally and Brexit.

Trade and investment in the eurozone have declined in the last two years, Boone said.

She also pointed out that with the slow growth and lack of investment, job creation could halve to 2 million this year and next, after hitting 4 million in 2018. This is “worrying as wages were starting to pick up”, she said.

She called for countries to work together and strengthen incentives to invest and overcome common challenges and the weak growth period ahead.

Germany’s GDP growth was revised down from 1.4% to 0.7% this year, France from 1.5% to 1.3% and Italy from 0.8% to -0.2%.

The OECD report highlighted that a “disorderly” Brexit would raise the costs for European economies substantially. “Uncertainty linked to Brexit has obviously had an impact on investment. Since 2016 there has been virtually no investment growth,” Boone said.

UK growth was revised down 0.6 percentage points to 0.8% of GDP for 2019 and 0.9% of GDP in 2020.

Economic growth is weaker in nearly all major economies around the world, the report highlighted. Global expansion is projected to ease further to 3.3% this year and 3.4% in 2020.

“Global growth keeps slowing” and does “not look very good”, Boone said.

China’s growth is also projected to moderate gradually to 6% by 2020, the OECD said. But further slowdown would hit growth and trade prospects around the world.

Boone said: “China has been largest contributor to growth globally in the last two decades. The impact of a slowdown in China could be two to three times higher for Japan, the euro area and the US [than other countries].”

“If China sneezes, we could all catch a cold,” she said.

Did you enjoy this article?

Related articles

Have your say

CIPFA latest

Related jobs