Published: Fri, July 12, 2019
Markets | By Otis Pena

Maltese economy projected to grow fastest among European Union member states

Maltese economy projected to grow fastest among European Union member states

Shares on the Continent were off their best levels come midday, amid concerns that trade frictions with the U.S. might worsen and as the euro gained in value following the "dovish" signals from the United States central bank chief the day before.

The commission also said the uncertainty's major source is Brexit.

However, the Commission warned that the near-term outlook for the European economy is clouded by external factors including global trade tensions and significant policy uncertainty.

"A regime of tiering (.) would have a very small impact on aggregate bank profitability and a questionable impact on credit conditions", the report said, adding that the costs of negative rates were likely outweighed by indirect positive effects.

In its Summer Economic Forecast published yesterday, the European Commission said the expected slowdown is the result of private consumption growth gradually moderating, mirroring the pace of job creation.

Prices, the Commission said, are expected to further increase during the peak tourism season and then slightly decelerate, pushing headline inflation to 1.8% in 2019 and 1.9% in 2020.

In the case of the euro zone, this year's estimate was unchanged at 1.2 per cent, but the forecast for next year was cut by 0.1 percentage points to 1.4 per cent.

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According to the Commission, Lithuania will post the fastest economic growth in the Baltics this year - 3.1 percent, while in 2020 Lithuania's GDP will increase 2.4 percent.

The ECB will next meet on July 25 and investors are split on whether the bank will pull the trigger on stimulus then or wait until its September 12 meeting.

The year-on-year rate of German harmonised CPI was revised higher to show an advance of 1.5%, instead of the 1.3% gain that had been initially calculated.

"Croatia's economy grew by 2.6% in 2018, slightly less than expected due to a particularly weak fourth quarter".

Forecasts for Italy remained unchanged, reiterating its economy will barely grow this year, seeing the worst growth rate in the whole EU.

While growth earlier this year benefited from a number of temporary factors, the outlook for the rest of the year looks weaker as prospects for a quick rebound in global manufacturing and trade have dimmed. Falling oil prices and the introduction of free public transport in 2020 are expected to dampen inflation.

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.

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