Eurozone growth is close to slowing as France and Italy GDP decline
Economic growth in the eurozone has come close to stalling point after the economies of France and Italy unexpectedly shrank in the final three months of last year.
Gross domestic product (GDP) in the currency bloc rose by just 0.1% in the fourth quarter of 2019 from the previous quarter, according to the EU statistics agency Eurostat.
The figures, released on the day Britain formally leaves the EU – which could inflict further damage on the continental economy as well as the UK – showed that the eurozone economy only expanded by 1% on an annual basis.
France’s economy – Europe’s second largest – shrank by 0.1% as nationwide strikes over Emmanuel Macron’s pension reforms dragged down growth, missing the forecasts of City economists polled by Reuters for a modest rise in GDP.
Some of the country’s key infrastructure, such as ports, the railway network and petrol depots, have been disrupted by the protests over Macron’s plan to raise the state pension age and to transform the nation’s 42 different retirement benefit schemes into a universal points system.
Manufacturing output dropped by 1.6% in the quarter as the strikes dragged down business activity, amid a wider downturn in factory output across several major economies, triggered by the US-China trade dispute.
The finance minister, Bruno Le Maire, said he expected France to bounce back from the downturn. “This temporary slowdown does not call into question the fundamentals of French growth, which are solid,” he said.
Italian GDP shrank by 0.3% on the quarter, marking the worst performance since early 2013, amid weaker domestic demand for goods and services. The figures were again weaker than City economists expected, in a signal of the broader malaise across the wider EU economy.
Out of the eurozone countries reporting GDP figures on Friday, only Spain recorded an expansion over the fourth quarter, as growth rose slightly to 0.5%, driven by a stronger export performance.
Fourth-quarter growth figures for Germany, Europe’s largest economy, will be published next month, as will those for the UK.
Rosie Colthorpe, European economist at the Oxford Economics consultancy, said the eurozone had ended 2019 with a whimper. However, she added: “With an encouraging recent rise in sentiment indicators, we still think that the eurozone economy should see growth pick up gradually in 2020.”
Britain leaving the EU could further damage growth in the eurozone should Brussels and London fail to agree a trade deal by the end of this year, when the UK’s transition period ends.
The International Monetary Fund has previously said Ireland would stand to lose the most, with the damage from a disruptive no-deal scenario almost as great as the impact in Britain.