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Forecast: Trade frictions of the US and China will harm the euro area

UNITED STATES (OBSERVATORY) –¬†According to most economists surveyed by Reuters, the economic growth of the eurozone, which is already partially weakened due to currency appreciation, will suffer from the ongoing trade confrontation between the US and China.

Nevertheless, this will not prevent the European Central Bank (ECB) from curtailing its asset purchase program this year and raising interest rates in 2019, although it is expected that inflation will remain well below the central bank’s target, at least until 2021.

Although consensus with respect to the growth in the last Reuters poll of more than 100 economists, held April 6-16, slightly changed from the survey last month, private business surveys show that the growth of the euro area reached its peak.

The range of forecasts in the last poll showed lower highs and lower lows for growth in the region compared to the previous month.

“The beginning of 2018 was disappointing for the euro zone economy especially after such a strong 2017. Although the prospects remain favorable, it seems that the peak of the eurozone growth has already been achieved and that 2018 will show some moderation,” said Bert Colinne, senior economist at the euro zone ING.

According to a separate Reuters poll, the single currency, which grew by 3% this year, will increase by another 4% against the dollar this year.

In the latest survey, more than 85% of the 55 economists who answered the additional question said that the trade tension between the US and China would damage the euro-zone economy.