We expect the euro area economy to expand by 2.1% in 2018, 1.7% in 2019 and 1.6% in 2020, driven by stronger domestic demand, while net exports are likely to become a moderate drag in 2019 and 2020. Risks to the growth outlook loom from the trade war/protectionism and a shortage of skilled labour.
Despite the narrowing output gap and continued employment gains, we expect wage growth to stay below the long-term average due to significant slack in the labour market.
We expect core inflation to pick up gradually until end-2019, while headline inflation should stay below target without a lift from energy prices.
We expect the ECB to end its QE programme in December 2018, before embarking on a slow hiking cycle starting in December 2019.
To read the entire report Please click on the pdf File Below: