The eurozone economy will grow less than expected next year, the EU executive predicted yesterday, as risks from international trade and geopolitical tensions weigh on the single currency area.

The European Commission forecast the 20-country single currency area to grow by 1.2 percent next year, down from a previous forecast of 1.4 percent.

European Commissioner for Economy and Productivity, and for Implementation and Simplification Valdis Dombrovskis said the EU expected US trade policy moves and responses by “key players like China will dampen global trade.”

Photo: Nicolas Tucat, AFP

“The EU’s highly open economy remains susceptible to ongoing trade restrictions and uncertainty,” Dombrovskis told reporters in Brussels.

The bloc’s executive, however, noted that US trade deals with partners including the European Union “alleviated some of the uncertainties.”

Struck in July, the deal with US President Donald Trump means EU exports face a baseline US levy of 15 percent, rather than a threatened 30 percent, which would have wrought havoc on the European economy.

The EU’s data is based on the implementation of the tariffs as agreed.

For the entire 27-country EU, Brussels expects growth of 1.4 percent next year, slightly lower than the 1.5 percent predicted in May.

Dombrovskis appeared upbeat despite the difficulties.

“The EU’s economy has beaten expectations in the first nine months of the year. Looking further ahead, we expect growth to continue at a moderate pace despite the challenging external environment,” he said.

The commission believes that the ramping up of Europe’s competitiveness paired with higher defence spending “focused on EU production” and new trade deals “could bolster economic activity more than projected.”

However, Europe is still lagging behind the US and China.

The International Monetary Fund (IMF) last month predicted the US economy would grow by 2.1 percent next year.

Even though it anticipated that China’s economy would slow this year, the IMF predicted the Asian powerhouse would grow by 4.2 percent next year.

But the forecast for Europe offered some relief after the commission said it now expected the bloc’s biggest economy, Germany, to grow by 0.2 percent this year, instead of the stagnation it previously predicted.

It also forecast the export-driven German economy to grow by 1.2 percent next year, slightly up from the 1.1 percent past prediction.

France, the second biggest European economy, is faring a little better, with growth of 0.7 percent expected this year and 0.9 percent next year.

Brussels also said inflation in the single currency area is expected to reach 2.1 percent this year, within touching distance of the European Central Bank’s two-percent target.

The “sustained return to stable prices is good news for European consumers who had seen their purchasing power eroded by inflation in recent years,” Dombrovskis said.

The commission believes inflation will slow down to 1.9 percent next year, higher than the 1.7 percent prediction published in May.

Although Brussels said food and services price rises are slowing, this was “counterbalanced by rising energy inflation.”