DBRS Publishes Macro Update for Europe

DBRS Ratings Limited published its latest edition of the Macroeconomic Update covering Europe. The publication provides DBRS Views and Key Trends in the Euro area and the United Kingdom (UK) in the near term.

DBRS expects slower growth in Europe given downwardly revised forecasts. In March 2019, the European Central Bank (ECB) revised its economic growth projection for the euro area (EA) for 2019 to 1.1%. This follows worse-than-expected growth of 1.8% in 2018, with the top growth performers including Ireland, Malta, Latvia, and Slovenia, and the underperformers Italy, Belgium, France and Germany. Despite the slowdown in the EA, labour market conditions have continued to improve in most countries, including Greece and Spain, which still have the highest unemployment rates in the EA. The EA inflation rate, however, has eased in recent months. The ECB also revised downwards its projection for HICP inflation for 2019 to 1.2%.

DBRS does not anticipate any rate hikes until indications of higher inflation and stronger economic growth emerge. The ECB, at its latest policy meeting on 7 March, changed its forward guidance on interest rates. The ECB also decided to launch a new series of quarterly targeted longer-term refinancing operations (TLTRO-III). In DBRS’s view, while the change in the forward guidance and the TLTROs will ensure that monetary policy conditions remain accommodative, these actions might not be stimulative enough to revive growth momentum in the near term.

In the UK, DBRS expects economic growth to slow. The slowdown in UK manufacturing of cars and steel products, and construction is contributing to the UK’s economic weakness. Surveys suggest that Brexit-related uncertainty is one factor adversely affecting investment decisions. It is likely that slowing global trade is another factor. The European Commission’s Winter forecast has the UK economy growing by just 1.3% in 2019.

The Macro Update Europe also comments on the major macro headlines and presents a Macro Dashboard, for both the Euro area and the UK, with the latest main macroeconomic, financial and market indicators. The publication contains DBRS Rating Update on Sovereigns, Sub-sovereigns, and Supranational institutions in Europe, as well as the list of commentaries produced by both the Sovereign team and the Financial Institutions Group (FIG) team in Europe over the past six months.

For more information on “Macro Update – Europe: I – 2019 (March)”, visit www.dbrs.com or contact us at info@dbrs.com.