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GDP growth is projected to remain strong, but ease to 1.9% in 2019, supported by the ongoing recovery of global output and trade, accommodative monetary policy and diminished political uncertainty. Growth is broad-based, driven by domestic and external demand. Wage growth is set to remain moderate, and inflation is projected to rise closer to, but still below, 2% by end-2019.
The ECB announced in October a gradual reduction of asset purchases, which is justified by an improving economic outlook and by the need to reduce the risk of financial imbalances. Policy rates should remain on hold well past the end of asset purchases and until inflation is clearly and persistently rising to the target, as emphasised by ECB guidance. The euro area fiscal stance is expected to be slightly expansionary. Countries with fiscal space should give priority to initiatives that yield the highest benefits for medium-term growth and inclusiveness. Removing unnecessary barriers to competition, easing entry barriers to professional services and investing in infrastructure for new technologies would boost much needed productivity growth.
Private debt remains high by historical and international standards and policy measures, such as improving insolvency frameworks, should support a faster reduction. High private indebtedness has led to a large stock of non-performing loans in some countries, which is hurting bank profitability and restraining new lending. To bolster resilience, the authorities need to further reduce links between sovereigns and banks and introduce more risk-sharing at the European level.
Economic Survey of the Euro Area (survey page)
Economic Survey of the European Union (survey page)
The Economic Consequences of Brexit: A Taxing Decision (main web page with paper)