Economy

EC lifts slightly Slovenia's 2019 GDP growth forecast to 3.2%

EC lifts slightly Slovenia's 2019 GDP growth forecast to 3.2%

Economists mostly expect the Governing Council to change its policy language at its July 25 meeting to show that rates might fall - the current wording says they'll stay at "present levels at least through the first half of 2020" - and reduce the deposit rate by 10 basis points to minus 0.5 per cent in September.

"On the domestic side, given the purely technical assumption of status quo in terms of trading relations between the EU27 and the United Kingdom, a "no deal" Brexit remains a major source of risk", the forecast read.

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

Croatia's exports rebounded following an unexpected contraction in the previous two quarters. Domestic demand, in particular household consumption, continues to be a driving force for economic growth in Europe thanks to the continuing increase in the labor market.

Although investment growth is set to moderate this year compared to the very high level of 2018, favourable financing conditions, high levels of capacity utilisation and a more intensive use of European Union funding suggest that it may remain an important growth driver, the Commission said.

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Malta's economy grew by 6.7% in 2018, making it the fifth year in a row in which real GDP has grown by over 5%.

"Domestic demand had so far been rather resilient, underpinned by strong employment and wage growth" while "the risk of recession was low", policymakers judged.

President Mario Draghi said in June that the European Central Bank is considering reducing interest rates further.

"Goods exports are expected to rebound in 2019, while service exports are expected to continue easing as supply side constraints become more evident and global competition in the tourism sector intensifies". During the same period, net exports fell due to the massive growth in imports. However, inflation accelerated greatly in April, mainly due to rising food prices.

European Central Bank staff trimmed their quarterly forecasts for growth and inflation in June, prompting the governors to extend their so-called "forward guidance" on how long rates would remain at historic lows to mid-2020. "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", the EC said. However, the reduction in the standard Value-Added Tax rate in January 2020 and stagnating energy prices should dampen inflation.