Slowing trade is pushing down the outlook for export-driven Germany and Italy, the Organization for Economic Cooperation and Development said today.
The OECD cut its German forecast by more than half, now projecting 0.7 percent growth in gross domestic product this year. Italys economy is on track for a 0.2 percent retraction in 2019, the Paris-based group of developed countries predicted.
The euro area as a whole is therefore on a path to an economic expansion of just 1 percent of GDP for the year, said the organization, down from its previous projection of 1.8 percent.
The downward revision could put pressure on governments to take measures to stimulate activity. Services liberalization, tax cuts and more government investment are among the concrete steps that should be taken, according to the report.
At the same time, the OECD found that Spanish and Italian banks are shrinking their loan books while German and French banks have somewhat slowed their rate of growth in lending, all of which could weaken growth.
Brexit meanwhile continues to weigh on U.K. business investment, adding to a decline since the referendum.