07.11.201903:51:00UTC+00IMF Says Europe Faces Spillovers From Trade, Manufacturing

The International Monetary Fund said there are signs that slowdown in European trade and manufacturing is spreading into the rest of the economy.

According to the latest Regional Economic Outlook for Europe, the region is set to grow at the slowest pace in six years in 2019.

The lender forecast 1.4 percent growth this year, the weakest since 2013. Growth is expected to rebound to 1.8 percent in 2020.

Euro area is forecast to grow 1.2 percent in 2019 before improving marginally to 1.4 percent in 2020. Germany is expected to grow only 0.5 percent this year and 1.2 percent next year.

A no-deal Brexit could have a sizeable impact on activity in the UK and the European Union. The UK economy is projected to expand 1.2 percent in 2019 and 1.4 percent in 2020.

The IMF noted that amid high uncertainty, risks to the outlook remain to the downside, with a no-deal Brexit the key risk in the near term.

The lender advised countries with ample fiscal space to take measures to boost potential output, while countries with elevated debt and deficit levels to generally proceed with fiscal consolidation.

"Given elevated downside risks, contingency plans should be at the ready for implementation in case these risks materialize, not least because the scope for effective monetary policy action has diminished," the IMF said.

Subdued inflationary pressures and slowing economic activity in many European countries call for monetary policy to remain accommodative, the lender noted. The pickup in wage growth is likely to have a more muted impact on inflation.