European growth is less than inflation

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The report noted the Bulgarian economy's stronger growth in the first quarter, at 3.5 per cent year-on-year compared to 3.1 per cent in 2018, but said that due to the weakening external environment, the country's economy was expected to expand at a slower pace in the second half of the year.

The worrying signals continue to come from the inflation forecasts, especially as Europe is at risk of sliding into a Japanese scenario of low inflation and low growth.

"Real GDP growth is forecast to pick up to 3.1% in 2019 as a whole before moderating to 2.7% in 2020", the Commission says in its interim European Economic Forecast for the summer 2019. In addition, the growth forecast for next year is partly due to a higher number of working days.

Touching on tensions in the Middle East, the commission said that they could raise oil prices. That could give the European Central Bank a reason to push ahead with fresh stimulus.

EU Commission lowers France GDP growth forecast for 2020 to 1.4% from 1.5% estimated previously, keeps forecast unchanged at 1.3% for 2019.

Valdis Dombrovskis, the vice president for the euro and in charge of financial stability, said: "All EU economies are still set to grow this year and next, even if the robust growth in Central and Eastern Europe contrasts with the slowdown in Germany and Italy".

Moscovici noted that the growth seen during the first quarter of this year was "vigorous", but was based on temporary factors, including the good sales of new vehicles, stockpiling in the United Kingdom ahead of the original Brexit date (29 March), and the mild winter that was favourable for the construction sector.

"The growth prospects outside the European Union are weak", Moscovici said. However, the reduction in the standard Value-Added Tax rate in January 2020 and stagnating energy prices should dampen inflation.

"The Spanish economy is really doing better, and I am pleased about that", Moscovici said. In Germany (0.5 percent) and especially Italy (0.1 percent), growth is practically nonexistant this year.

These factors continued to negatively affect the confidence in the manufacturing sector, which is most exposed to worldwide trade, and this is expected to reduce growth prospects for the remainder of the year.

The European Commission's next economic forecast will be the autumn economic forecast in November 2019.



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