Key Questions for the Eurozone Economy to 2025 by Investing.com

Investing.com — Eurozone economy in 2018 It faces a delicate balancing act in 2025.

The bank’s analysts believe that key questions for the region’s economy center on consumer spending, inflation, foreign trade risks and the impact of political changes.

They explain that the main area of ​​focus is whether the consumer recovery is accelerating or revitalizing.

UBS says “growth this year will come in at a close trend of 0.9%” as “household consumption” continues to rise, driven by strong wage growth and falling interest rates.

As the most important driver of economic activity in the region, UBS said despite challenges elsewhere in the economy, a strong recovery in consumer spending could lay the foundations for more sustained expansion.

However, he added that the prospect of a new trade conflict with the US, especially in the era of President-elect Trump, is still a concern.

UBS warns that tariffs on EU exports in particular could hurt the economy, although analysts say the impact is unlikely to be contained.

A scenario of “selective tariffs” targeting certain sectors could result in a modest GDP loss of 0.2-0.5%, the bank said. Still, UBS does not foresee these risks leading to a recession in the eurozone.

In terms of monetary policy, the European Central Bank (ECB) is expected to continue easing rates, which may bring the deposit rate to 2%. Even with inflation slowing, UBS says the threat of further economic challenges could call for further rate cuts, although the risks to this view are considered “balanced”.

On the political front, elections in Germany and continued uncertainty in France could create further uncertainty.

UBS suggests that a change in leadership in Germany could lead to a “more critical approach to economic policy”. Meanwhile, the ongoing war in Ukraine remains a sign that any shift toward peace could raise sentiment in Europe.