Ifo slashed German economy growth forecast in the Winter report released today. 2018 growth forecast is revised down from 1.9% to 1.5%. 2019 growth forecast is revised down from 1.9% to 1.1%. For 2020, growth forecast is revised down from 1.7 to 1.6%. Ifo warned that “the weakness triggered by the automotive industry will continue until 2019. A wide range of uncertainties are also curbing the global economy, and especially Brexit, Italy and US trade policy to name but a few.”
In the report, Ifo said downside risks for global economy “grew markedly” compared to autumn. US has imposed customs duties on a “large number of imports”, followed by retaliation from China and the EU. And “it is impossible to predict the direction that the trade dispute will take”. In case of escalation, Ifo warned “global trade in goods and overall economic production can be expected to suffer a major setback.”
Also, trade dispute will lead to faster rise in inflation. And if advanced economies central banks opt for “far more restrictive measures”, this may prompt a “return to capital outflows from emerging markets.” Hard Brexit “represents another risk for the economy both in Britain and in the euro area.” Besides, high risk premium on Italian government bonds also
pose a threat to economic development in the Eurozone.
