Global trade war to hold back modest Eurozone growth - Reuters poll

According to the latest Reuters poll of economists on the Eurozone economic outlook, a majority of them sees a modest slowdown in the economic growth this year when compared to that seen in 2017, in light of a brewing US-led trade war.

Key Findings:

“The currency bloc grew at its fastest pace since the 2007-2008 financial crisis last year, but lost momentum in early 2018 and the coming year’s outlook remains tepid, with inflation slowing down slightly and veering away from the target.

The main risk to the outlook remains the United States and China’s tit-for-tat trade tariffs and threats that there are more in store.

Still, the Reuters poll of 90 economists taken between Aug. 13 and 21 shows that the European Central Bank is on track to shutter its asset purchase programme by December after spending a whopping 2.6 trillion euros on bonds to boost price pressure.

Nearly two-thirds - 33 of 53 economists - said Trump’s trade disputes have had a damaging impact on their eurozone growth predictions. While the remaining 20 respondents said they had no impact, none of the economists expected them to be beneficial.

Median growth forecasts for early next year were downgraded from a July poll. Quarter-on-quarter growth was expected at 0.4-0.5 percent every quarter this year and next. Forecasts ranged from 0.3 to 0.6 percent.

The economy should expand 2.1 percent this year after 2.7 percent in 2017, slowing down further to 1.8 percent in 2019.

When asked about the probability of a eurozone recession over the next 12 months, the median view rose to 15 percent from 10 percent in last month’s poll.

The poll showed the ECB will hike its deposit rate by 15 basis points to -0.25 percent in the third quarter of next year and the refinancing rate to 0.25 percent from zero in the fourth quarter of 2019.”