Eurozone | slightly upward growth forecasts, but weakness persists

Summary

Eurozone growth forecasts are revised slightly upwards due to better incoming data, but we continue to expect some slowdown from 1.2% in 2019 to 0.9% in 2020 before recovering gradually to 1.2% in 2021.

Key points

• Key points:
• More signs of stabilization in 4Q19. Our MICA-BBVA model projects subdued growth to extend in 4Q19 (around 0.2% QoQ) in line with our forecasts of annual GDP growth at 1.2% in 2019.
• Looking forward, we do not expect major changes in growth drivers: Solid domestic factors should be underpinned by accommodative monetary policy and mildly expansionary fiscal policy. This could partly offset the weak global demand while external headwinds ease in the short-term.
• Risks remain title to the downside, but ease somewhat. The probability of a hard Brexit or higher car tariffs in the short term has declined significantly, but could arise again during the year, while US-China trade disputes are unresolved. In Europe, political noise increases in some member states.

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