Economic growth among the 19 EU member states comprising the eurozone is expected to slow down more than anticipated this year, estimates the International Monetary Fund (IMF).
The IMF projects eurozone growth at 1.2% this year, a downward revision from its earlier estimates from April of 1.3% growth. Analysts said the new and lower estimate compares very unfavorably to the eurozone's 1.9% expansion in 2018.
The IMF estimates the eurozone economy might improve by 1.4% in both 2020 and 2021. Its previous estimate was 1.5% growth in both years.
Eurozone inflation is expected to come to 1.2% this year, 1.4% in 2020 and 1.5% in 2021, said the IMF. These figures fall way short of the European Central Bank's target rate of below 2%.
The IMF said the marked economic slowdown is mostly due to persistently weak growth in Germany, the eurozone's largest economy, whose government also continues to resist boosting public spending. Germany is now expected to grow by only 0.5% this year, well below the 0.8% the IMF predicted in April. The projected 0.5% growth will be one-third of the actual growth recorded in 2018.
The IMF cut its growth forecast for France, the eurozone's second-largest economy, despite better-than-expected output estimates for the third quarter. France is now expected to grow by 1.2% this year compared to the 1.3% previously forecast. Italy's economy, the eurozone's third largest, will remain stagnant this year and into the next.
The IMF is urging Germany to take the lead in lifting the eurozone out of the doldrums by spending more. It's again calling for a "synchronized fiscal response" by eurozone governments to the slowdown.
Analysts blame the slowdown on the U.S.-inspired global trade tensions and its huge impact on the eurozone's export-driven industries. The IMF worries the slowdown might spill over to services, the largest economic sector in the eurozone.
Another negative factor was Brexit. The IMF said a No-Deal Brexit will trigger vast negative effects on both the United Kingdom and the EU.
On the other hand, an orderly Brexit might see Britain's economy grow by 1.2% this year and 1.4% next, said the IMF. Growth stood at 1.4% in 2018.
