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The Eurozone economy: weak fourth quarter growth ends a disappointing year

Date: 10th February 2020

The Eurozone economy: weak fourth quarter growth ends a disappointing year
In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, discusses the latest Eurozone GDP data:
    • Eurostat recently announced that the Eurozone grew by 0.1% (QOQ) in 2019Q4. GDP grew by an estimated 1.2% in 2019 after rising 1.9% in 2018.
    • Within the Eurozone, Germany grew by just 0.6% in 2019. French and Italian GDP fell by 0.1% (QOQ) and 0.3% (QOQ) respectively in 2019Q4; annually, they grew by 1.2% and 0.2% in 2019, respectively. Spain’s performance was firmer, growing by 1.8% in 2019.
    • The Eurozone’s poor performance in 2019 continues the picture of relative economic malaise seen over the past 10-12 years.
    • The EU27 continues to lose share of global GDP. In 1980 its share was nearly 29% (MER terms), by 2018 it was down to less than 19% and it is expected to continue declining. In contrast, the US share has shown only a modest fall.
    Central Banks Watch:
    • The MPC left the Bank Rate unchanged at their January meeting at 0.75%. The Bank downgraded their growth forecast for 2020 to ?% from 1?%.
    • The Fed left interest rates unchanged at their January meeting.
    UK economic update:
    • The Markit surveys for January (for manufacturing, construction and services) showed marked improvements, following the decisive general election result (12 December).
    • The Bank’s credit data firmed in December.
    Concerning Brexit developments:
    • The European Parliament ratified the Withdrawal Agreement on 29 January 2020 and the UK left the EU on 31 January.
    • The UK entered the transition phase on 1 February, which is due to end by end-2020, by law. During this time, the new UK-EU relationship is due to be negotiated.

    Ruth Lea said, “The Eurozone economy ended 2019 on a very weak note. Moreover, given Germany’s slowdown, its “powerhouse” economy, it will struggle to gain much momentum during 2020. The Eurozone’s growth performance since the Great Recession has been disappointing, weaker than the UK’s and significantly weaker than the US’s. Of the large Eurozone countries, Germany has been the best performer, but German growth has lost impetus as the global economy has slowed. French growth has been singularly lacklustre, whilst Spain has recovered quite well after a prolonged recession. Italian GDP was still 4% lower in 2019 than in 2007, the economy is all but stagnant, whilst Greek GDP was still over 20% lower in 2019 than in 2007, despite some recent improvement.”

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Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482
Follow Ruth on Twitter @RuthLeaEcon

Sam Cartwright
020 7379 4415
Jais Mehaji
020 7379 5151