Published: Fri, July 12, 2019
Finance | By Loren Pratt

German inflation moves closer to ECB target, revised data shows

German inflation moves closer to ECB target, revised data shows

The projections for Bulgaria's economic growth in 2019 and 2020 remain unchanged - 3.3% and 3.4% respectively.

Brussels now expects gross domestic product (GDP) in the single currency bloc to increase by 1.4 percent in 2020, down from 1.5 percent in its previous forecast in May.

The Commission also notes that the rise is on the back of domestic demand.

Investment is expected to remain robust over the forecast horizon, supported by planned infrastructure and health projects.

The commission confirmed its prediction that economic growth in the euro zone would slow this year to 1.2% from 1.9% in 2018. The Polish and Hungarian economies are set to grow by 4.4 per cent, Romania four per cent, Slovakia 3.6 per cent, Bulgaria 3.3 per cent, Slovenia 3.2 per cent, Croatia and Lithuania 3.1 per cent, Latvia three per cent, Estonia 2.9 per cent and the Czech Republic 2.6 per cent.

"HICP inflation was 1.3% in the first quarter of 2019".

Commenting the Commission's forecast for Latvia, the Commission's Vice-President for the Euro and Social Dialog Valdis Dombrovskis said that Latvia's economic development this year was still being driven by strong domestic demand and increasing exports.

ECB Governing Council member Olli Rehn has said that if the ECB wants to fulfil its mandate, further monetary stimulus is now needed until the economy and inflation prospects improve.

"Goods exports are expected to rebound in 2019, while service exports are expected to continue easing as supply side constraints become more evident and worldwide competition in the tourism sector intensifies".

These factors continued to negatively affect the confidence in the manufacturing sector, which is most exposed to worldwide trade, and this is expected to reduce growth prospects for the remainder of the year.

"Employment growth should moderate over the forecast horizon and the unemployment rate is expected to continue declining towards an historic low in 2020", the Commission says.

The IMF also predicted inflation to remain far off the ECB's close-to-2% target at least until 2022, and forecast a 1.3% rate this year, in line with European Central Bank estimates.

"In the first five months of 2018, inflationary pressures remained subdued due to negative inflation in unprocessed food prices as a result of changes in the applicable Value-Added Tax rate adopted in September 2018". Weakness in the manufacturing sector, if it were to endure, and depressed business confidence, could spill over to other sectors and harm labour market conditions, private consumption and ultimately growth. Falling oil prices and the introduction of free public transport in 2020 are expected to dampen inflation.

Like this: