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Eurozone Will See Slower Economic Growth

Summary:
The euro area’s economy will grow by 0.4 percent respectively in Q3 and Q4 2018 and Q1 2019, according to the three economics institutes ifo (Munich), ISAT (Rome) and KOF (Zurich). This development will mainly be due to domestic demand. The growth rate for 2018 as a whole is 1.9 percent. The production losses of German car manufacturers weighed on the Eurozone in Q3 2018. Industrial production in the Eurozone is expected to remain unchanged in Q4 2018, and to subsequently grow twice by just 0.2 percent quarter-on-quarter. The inflation rate will reach 2.0 percent in the fourth quarter, which is close to the rate of just below 2.0 percent targeted by the European Central Bank. It will subsequently edge back down to 1.9 per cent and 1.8 per cent in

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The euro area’s economy will grow by 0.4 percent respectively in Q3 and Q4 2018 and Q1 2019, according to the three economics institutes ifo (Munich), ISAT (Rome) and KOF (Zurich).

This development will mainly be due to domestic demand. The growth rate for 2018 as a whole is 1.9 percent. The production losses of German car manufacturers weighed on the Eurozone in Q3 2018. Industrial production in the Eurozone is expected to remain unchanged in Q4 2018, and to subsequently grow twice by just 0.2 percent quarter-on-quarter.

The inflation rate will reach 2.0 percent in the fourth quarter, which is close to the rate of just below 2.0 percent targeted by the European Central Bank. It will subsequently edge back down to 1.9 per cent and 1.8 per cent in the first two quarters of 2019 respectively. Downside risks to economic growth will increase. These risks include Brexit, escalating trade wars, the vulnerability of emerging markets and financial market volatility. The effects of the US Federal Reserve's normalisation of monetary policy on the world economy also remain difficult to assess.

Clemens Fuest
Clemens Fuest took over from Hans Werner Sinn as chairman of the IFO Institute in April 2016. He is professor at the Faculty of Economics of the University of Munich.

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