The eurozone economy will slow down in 2020 for the third consecutive year, according to a Financial Times poll of economists, who forecast it will be held back by political instability, trade tensions and disruption in the auto industry. The European Central Bank (ECB) expects the eurozone economy to grow 1.1 per cent this year in 2020, down from 1.2 per cent in 2019, 1.8 per cent in 2018 and 2-4 per cent in 2017. But the 34 economists polled by the FT were more pessimistic, forecasting on average that growth would dip below 1 per cent this year – the eurozone’s slowest rate for seven years.
Their forecasts ranged from zero growth, at the most pessimistic, to 1.5 per cent, at the most optimistic. “With no end to global trade uncertainty in sight, the tug of war between global investment headwinds and pockets of domestic resilience, underpinned by easy ECB policy, will continue to make for uncomfortable eurozone GDP readings,” said Lena Komileva , chief economist at G+ Economics.
Afurther eurozone slowdown could put pressure on Christine Lagarde, the ECB’s new president, to consider additional monetary policy easing. It is also likely to prompt more calls for governments with stronger financial positions – such as Germany and the Netherlands – to embark on a fiscal stimulus.
The ECB injected a sizeable wave of cheap money into the economy in September when it cut interest rates further into negative territory and restarted its C2.6tn bond-buying programme in response to signs of sliding growth and inflation. However, with concern mounting about the negative side effects of its unconventional monetary policy, some economists fear the central bank could run out of ammunition to counter any further slowdown.