The Eurozone should remain in the stable vortex of the global economy as we believe the region has enough margins to absorb the negative external shocks of liquidity and the trade uncertainty. However, after +2.6% in 2017, the highest in 10 years, GDP growth should slow down to +2.1% and +1.8% in 2018 and 2019, respectively. We expect growth to reach +0.4% to +0.5% q/q in Q3 and to remain stable for the next two quarters. Going forward, a lower net external trade contribution is expected to be partly offset by stronger domestic demand. Lower inflation (1.7% at end-2018) coupled with the rise in disposable incomes will support households’ purchasing power (+1.4% in 2018). Companies are expected to invest as they still enjoy high margins and low financing costs. The ECB will continue to play the safeguard role: (i) first interest rate hike in fall 2019 with the refi rate expected to reach 0.75% at end-2020; (ii) reinvestment of bonds maturing until 2021 after the end of QE in December 2018.
