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News from 2018-12-07 / KfW Research
KfW Business Cycle Compass Eurozone December 2018
Economy is facing headwinds
An influenza wave, inclement weather, strikes and now the problems of the car industry with the new emissions standard: 2018 is the year of economic stumbling blocks. This is one reason why European economic growth also disappointed in the third quarter.
Foreign trade, in particular, is causing sustained headwinds. However, the domestic economy is fundamentally on solid footing. This leads us to remain optimistic despite the ongoing cooling of sentiment indicators. We continue to expect sound economic growth in the coming year.
We are therefore adjusting our forecast for real GDP growth in the euro area only slightly downwards. We now predict the economy to expand by 1.9 % in 2018 and by 1.6 % next year.
However, the list of downside risks has not been shortened. In particular, an escalation of the trade conflicts, a disorderly Brexit and an intensified reaction of the financial markets to Italy's budgetary policy could have a negative impact on Europe's growth course.