A European Financial Pandora Box


Economic forecasts, especially those run on a long term basis, represent a very solid tool on which further macroeconomic indicators shall be developed. However, not everything goes smoothly. For instance, when it comes to the powerful amalgam of European individual national economies, not so many institutions/organisations dare to provide their view on how the European economy will look like in two years! What are the available predictions? Shall the EU open its economic Pandora box in two years?

Several stakeholders have been providing us with their own versions of forecasts, however, as stated earlier, not all of them are keen to deal with a very complex European economic prediction. In this article, the predictions of the World Bank, European Commission, OECD, and several major organizations will be presented.

The World Bank has recently issued its trends of the GDP growth. The predictions are disappointing, with some estimates according to which the Euro Area shall experience a decrease of its real GDP growth by 2020, with only 1.5% growth! If this comes true, that would represent the smallest growth ever since the global economic crisis hit the world in 2008/2009. For 2019, the World Bank predicts a 1.7% growth of the European GDP, while for 2018 this amount is 2.1%. It is quite less, comparing to the predictions for the global economy. For instance, the world’s economy shall grow of 3.1% in 2018, 3% in 2019, while the 2020 growth will be 2.9%. The World Bank prognoses the similar trend for the (still) biggest world’s economy, the USA. By the end of 2018, it should achieve the 2.7% growth, then 2.5% next year, while in 2020 it will have 2% of GDP growth.

The Economic Intelligence Unit provides estimates up until 2050. However, it does not include the EU as a whole, but some single Member States – France, Germany, Italy and the UK. In 2014, it listed Germany as the fourth world’s economy, followed by France and the UK, which was on the sixth place. Italy was eighth in the top ten of the biggest economies in the world. For the 2050, the report estimates Italy outside of this dream team group, while Germany will the take the sixth place, and the UK and France will get the two lowest places in top ten score board. This report also predicts the global dominance of the three largest economies by the time: the Chinese, the US and the Indian one, followed by the next 5 economies (altogether).

The predictions issued by the Organization for Economic Cooperation and Development are done on an even longer term – until 2060! These forecasts show that the OECD geographical area will measure a GDP of more than 100 trillion Euros. It fits with the previous ones showing the Chinese economy as a leader by 2060, followed by India and the United States. The Euro Area is placed as fourth, with 21 trillion Euros of the GDP, followed by Indonesia, Japan, Mexico, Brazil, and Russian Federation.

The International Monetary Fund forecasts for 2018-2019 reflects the increased global growth momentum and the expected impact of the recently approved US tax policy changes. The IMF predictions are quite similar to the previous ones. For instance, they predict the global growth of 3.9% in 2018 and 2019 respectively. As the Euro Area is concerned, it is estimated that it will grow by 2.2% in 2019, and 2% in 2020. The UK will grow by 1.5% in 2019 and 2020 respectively, Germany will achieve 2.3% (2019) and 2,1% (2020) growth, while France will have 1.9% bigger GDP in both coming years.

As we enter unknown economic waters, it is important to reassess how we use forecasts. Not only should forecasters reveal how confident they are, we also need to understand the limitations of the forecasts on which we are basing our businesses, votes and well–being. It still seems that the EU will not open its economic Pandora box. A very gloomy future is in front of the EU leaders, but this stable growth should encourage all of them to keep Europe on track within the global economic and financial affairs.

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