The Eurozone is already bracing for the fallout of tightening trade tensions with the U.S.
Europe’s summer interim forecast puts growth 0.2% lower than its spring forecast, around 2.1% for 2018 and 2% for 2019.
Commissioner for Economic and Financial Affairs, Taxation and Customs Pierre Moscovici said the downward revision was due to external factors such as U.S. trade uncertainty and high oil prices.
Oil prices are driving inflation, with 1.9% for the EU as a whole and 1.7% for the countries using the euro. Eurozone wages have also finally begun to climb, the FT reported earlier this week, but still lag overall economic growth.
Spain, for example, is set to grow 2.8% in 2018, down 0.1% from the spring’s forecast, before decelerating slightly in 2019 to 2.4%, thanks to strong private consumption and construction investments.
The U.K., however, is projected to slow to 1.3% for 2018, down 0.2%, meaning it will be one of the slowest-growing EU economies ahead of next year’s scheduled date for Brexit.
Moscovici noted that the forecast is based on maintaining the status quo and that further barriers to trade could still lower growth this year.