Thursday, August 22, 2024
In the EIU's September 2024 World Outlook video, Europe Regional Director Emily Mansfield and Chief Economist Agnese Ortolani discuss the region's economic and policy outlook following the European Parliament elections and in the run-up to the US elections.
Eurozone and EU real GDP both grew 0.3% on a quarterly basis in the second quarter of 2024, with momentum in the European economy strengthening somewhat as most EU economies continue their gradual recovery from 2023.
The EIU forecasts that the EU economy will expand by about 1% this year, above last year's growth rate. The improvement will be driven by strengthening private consumption, reflecting easing inflation and solid wage growth, and by rising demand for EU exports. However, the EU economy still lags behind the United States in recovering from the pandemic, and uncertainty about the EU's economic outlook is growing as the US presidential election approaches.
“The US presidential election in November is expected to be closely contested, but the EIU's baseline forecast is for Donald Trump to win. If he takes office, we expect US import tariffs to increase from the current 2% to 5%-10% by late 2025, and the EU to respond with targeted retaliatory tariffs from early 2026. Trade policy uncertainty will weigh on European business sentiment and investment from 2025, with export growth and industrial production hit the hardest in 2026. We expect the EU economy to expand by an average of 1.7% in 2025-28, as the European Central Bank gradually cuts interest rates and lending conditions ease. However, the looming US-EU trade war will put a limit on growth.”
Agnese Ortolani, Chief European Economist at the EIU
One of the most important elections in Europe this year is the European Parliament election, where the green vote played a key role in the re-election of European Commission President Ursula von der Leyen. Von der Leyen will need to make concessions on green policy to pass her legislative agenda, leaving far-right Eurosceptics largely excluded from the EU Parliament's majority. The main policy focus of the next European Commission will be competitiveness, industrial policy and defense, especially in the context of a looming trade war and increasing economic competition with the US and China. Environmental protection laws will not be repealed, but the focus will shift to enforcing existing regulations and helping EU industry achieve environmental protection goals.
The next steps will see EU member states nominate candidates for commission posts, to be approved by von der Leyen by the end of September, after which the European Parliament will appoint the commissioners in November and the new commission will officially come into force on December 1.
The analysis and forecasts presented in this video can be accessed through the EIU's Country Analysis service. This comprehensive solution provides unparalleled global insights covering the political and economic outlook for almost 200 countries, enabling organizations to effectively identify potential opportunities and risks.
Thursday, August 22, 2024ArticleTagsBusinessEconomicsForecastGeopolitical RisksTradeUS ElectionsEuropeUS Consumer
