Low industrial output, low currency inflation, low interest rates, coupled with a high degree of macroeconomic uncertainty, the European economy has experienced a difficult 2019, although the European Union’s gross domestic product (GDP) is expected to maintain positive growth for the seventh consecutive year. However, the actual growth rate is only slightly higher than 1%, which may hit the lowest level since 2014.
\"The road ahead is full of challenges.\" The European Commission’s economic forecast report released in November 2019 believes that the European economy seems to be entering a period of weak long-term growth and weak inflation. Although the labor market remains strong and the unemployment rate continues to decline, the degree of support for the European economy from the external environment has been greatly reduced and uncertainty is increasing.
According to the latest prediction of the European Commission, the EU economy is expected to grow by 1.4% in 2020. The European Central Bank predicts that the euro zone economy will grow by 1.1% in 2020. In contrast, the International Monetary Fund (IMF) is relatively optimistic and expects that as global trade picks up, European economic growth is expected to rebound to 1.8% in 2020. Analysts believe that uncertainty is still the main source of downward pressure on the European economy in 2020, including the long-delayed UK \"Brexit\" and trade friction between the United States and Europe.
With the victory of the Conservative Party in the British parliamentary elections in December 2019, the new parliament subsequently passed the \"Brexit\" agreement related bills, the probability of the UK officially breaking up with the EU at the end of January 2020, the corresponding does not Decreased certainty. However, the economic and trade relations negotiations after the nominal \"Brexit\" may trigger a new round of protracted game. If the United Kingdom and the EU cannot complete the economic and trade relations negotiations by the end of 2020 and do not extend the \"Brexit\" transition period, then the substance Disorder on the \"Brexit\" will significantly impact the European economy.
Clemens Pfister, the director of the Eif Institute for Economic Research in Munich, believes that it is too early to lift the British \"Brexit\" alert. It is difficult for the EU and the UK to reach a free trade agreement during the transition period, not to mention the internal post-election UK Problems still exist, including the second possible Scottish independence referendum, which will raise concerns about uncertainty.
Another analysis pointed out that if the EU and the United Kingdom cannot reach agreement on key issues such as tariff rates and regulatory standards, the UK \"Brexit\" may be urgent again at the end of 2020, affecting new investment and the confidence of businesses and consumers.
At the same time, uncertainty related to international trade continues to overshadow Europe. European Central Bank President Lagarde pointed out that since 2018, world trade growth has been halved, and continued trade tensions and geopolitical uncertainties have further slowed down world trade growth.
\"Facts have proved that these uncertainties last longer than expected and obviously are affecting the euro area.\" Lagarde said.
As the EU's largest trading partner and export market, the protectionism of the United States directly affects Europe, covering steel and aluminum products to automobiles and their parts, to the aviation industry subsidy disputes, and the new one caused by the French digital tax. Wheel tension.
The IMF warned that under high uncertainty, the weakening of European foreign trade and manufacturing may spread to other sectors, especially the service industry, at a faster rate and to a greater extent.
How to achieve sustainable growth in uncertainty? On the one hand, Europe relies on ultra-loose monetary policy, on the other hand, it attempts to tap internal growth momentum from fiscal policy and structural reforms, thereby reducing external demand dependence and increasing growth resilience.
In September 2019, the European Central Bank decided to further reduce the overnight deposit rate in the euro area and restarted its bond purchase program. Although the interest rate level of the Eurozone in 2020 is expected to remain at a historically low level, and quantitative easing continues to stimulate liquidity, the marginal benefits of ultra-loose monetary policy are diminishing, with side effects rising, especially negative interest rates.
The European Central Bank believes that asset valuations that rely on low interest rates may face adjustments in the future. In the medium and long term, the main risk points that affect the financial stability of the euro area include mispricing of some financial assets, heavy debts of public and private sectors in some member countries, gloomy earnings prospects for the banking industry, and increased risk appetite for non-bank financial sectors in pursuit of high returns .
\"If other policies support growth together with monetary policy, then monetary policy can achieve its goals faster and with fewer side effects.\"
Lagarde emphasized that fiscal policy is one of the key factors. She called on member countries of the Eurozone to expand productive investment. Lagarde said that investment is particularly important to meet current challenges, not only to stimulate demand in the short term, but also to keep the euro zone competitive in the long-term global challenges.
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