Recent Federal Reserve policy measures have shown that central banks are currently guiding global economic outlook in a variety of ways. AskTraders reports that markets have responded favorably to the Federal Reserve’s decision to reduce interest rates by 25 basis point. This resulted in the stock market reaching new record highs. The Eurozone’s central bank members have adopted similar stance policy metrics. They include a monetary Union of 19 of the 28 EU countries (European Union). It is second in nominal terms, and second in purchasing power parity (PPP), to the United States. World economists consider the Eurozone’s economy to be a significant weight, as it produces 22% of the global GDP annually.
Future Economic Outlook
The Eurozone grew in 2019 at a similar pace to other central banks, but it has not reached its previous highs. Incomes are supported by healthy, unplanned consumer spending. However, they are limited by well-directed investments and activities that have an adverse external environment.
The Brexit event has caused a decline in the economy. Britain is one the top GDP producers in the world. Political analysts believe that the victory of the UK’s conservative party shows a clearer path ahead and reduces uncertainties. The European Commission recently reproached Spain, Italy and France for failing to implement meaningful fiscal management measures, and thus exposing themselves and their economies to economic shocks.
The European Union includes the internal components of mixed economies. They are based on free market principles and advanced social model. Euronext, the premier stock market in Europe and the 6th largest worldwide stock market, is also known as Euronext. The European Union has a good relationship with other economically developed countries, including the United States, China and Russia. In 2012, the subtotal value of trades in the Eurozone between foreign countries was $5.1 trillion. Comparatively, the EU trades around $9.1 trillion with foreign countries, which is the highest level of domestic and foreign investment currently visible in the global economy.
The Economy’s Sectors
Services, energy, tourism and agriculture are the four major industry sectors of the EU. The EU’s services sector is the most important as it accounts for 70% of the total regional GDP. This is quite impressive in comparison to other sectors as the agricultural sector only holds 1.8% of total GDP. The EU spent $34 billion in 2013, which is 33 per cent of its $148 billion total budget. Because the Eurozone is a tourist hub, the EU stresses tourism as a key sector for continued growth. Paris and London were the most visited cities with 16.9 million and 16,000,000 visitors, respectively. The Eurozone also has large natural gas, uranium and coal reserves that can be used to produce energy. As the region produces 1,241,370 (2013) barrels per day, the EU is the second largest oil consumer.
Although the Eurozone is a well-developed union, it still faces many of these same problems as other economies around the globe. Because of its important contribution to the global economy, the EU is thriving more each year. By growing economically, the member states play a vital role. Bulgaria, Czech Republic, Estonia, Hungary, Ireland, Latvia, Lithuania, Luxembourg, Malta, Poland, Romania, etc. These are just a few of the countries with growing GDPs. These are just a few of the economic giants that exist in the Eurozone. Based on per capita income, the top five countries are Austria, Belgium Finland, France and Germany.
Labour Market and Economic Growth
The Eurozone had a 8.1% unemployment rate. The Czech Republic was the lowest member state with 2.3%, while Spain had 14.9%. The EU is not enjoying the momentum. Slow global growth and uncertain external backdrops will limit investment and reduce export activity. Consumer spending will be slowed by lower job gains in key countries due to tight labor markets. The outlook is already clouded by the political uncertainty in Spain and Italy, as well as Brexit (described below).
Although growth is expected to be a meager 1% by 2022, economists remain optimistic about its viability.
Factors affecting Brexit
Brexit is simply Britain’s decision to leave the EU. This is a significant turnoff for Eurozone economies as Britain is not only one of the largest countries in Europe, but also the world. The new PM proposes a new Brexit agreement with new customs arrangements after winning the elections. Brexit will mean that the UK will be expelled from the EU, with all its financial, political, and economic relationships.
After Brexit, the Eurozone Economy
Despite all the negative signs, the eurozone economy continues to grow at a moderate pace. Trade tensions and Brexit uncertainty will lead to a slowdown in the eurozone’s economy. In the three months ending September, the Eurozone economy grew by 0.2%. Eurostat reports that the annual growth rate for the Eurozone economy is 1.1 percent. Current conditions indicate that there are fears that the growth rate could slow down. According to economists, the growth rate will fall to 0.1% in the next quarter.
Global Economic Barriers
There are many internal and external barriers to the EU. From 1999 to 2003, research showed that barriers remain in 11 EU member countries’ manufacturing industries. The most detrimental barriers are those that prevent people from moving. The trade integration variation is only 25% due to the transport and geography costs. The distance between the origin and destination shipments is at 5 percent. Only 7 percent of variation can be explained by policy factors. The EU must also address technical barriers of 5 percent if it is to move forward. Economists remain optimistic despite all the difficulties and chaos in trade and business that define the economy. Minor and major changes to the policies, agreements and contracts can make all the difference and the EU will still be significant.