Europe’s real gross domestic product (GDP) for this year is projected to grow at its lowest rate since 2013, according to the International Monetary Fund (IMF). In its latest Regional Economic Outlook, the fund forecasts real GDP across the continent to slow down to 1.4 per cent in 2019 from 2.3 per cent last year, before rebounding to 1.8 per cent in 2020.
The same forces driving weakness in manufacturing and trade for advanced Europe are likely to continue, the IMF predicted. It also noted that risks to the outlook remain to the downside, with a no-deal Brexit the key risk in the near term. The lender encourages countries with fiscal headroom to take measures to increase potential output, while highly indebted countries are advised to proceed with fiscal consolidation.
Meanwhile, a closely watched private survey showed that Germany’s private sector contracted in October as new orders fell for the 13th consecutive month and factories cut jobs at the fastest rate in almost 10 years. The IHS Markit’s Purchasing Managers’ Index (PMI) for manufacturing, which accounts for about a fifth of Europe’s largest economy, inched up to 42.1 last month from September’s 41.7, staying well below the 50 mark that separates expansion from contraction.
The reading came in slightly above an initial estimate published last month but was still the second lowest since June 2009. Phil Smith, economist at IHS Markit, said that the prolonged recession in manufacturing posed an increased threat to the domestic economy as factories cut more jobs.
Finally, in the UK, sentiment among small and medium-sized manufacturing firms plummeted faster than at any time since July 2016, a quarterly survey from the Confederation of British Industry (CBI) showed on Wednesday. According to SME Trends Survey, business sentiment fell to -32 in the three months to October, the fastest fall since July 2016. At the same time, output remained flat and a balance of -9 expects it to fall next quarter. Total new orders slid slightly, driven by ongoing falls in both domestic orders and export orders. SMEs blamed the political and economic uncertainty abroad as the biggest reason for the lack of optimism.
This report is compiled by Bank of Valletta for general information purposes only.