Western Europe, Real GDP YOY%
2015201620172019E2020E2021E
Western Europe, Real GDP YOY%1.522.71.91.71.7
Austria1.113.221.61.5
Belgium1.51.51.71.61.41.5
Denmark0.621.11.91.81.8
Finland0.42.62.42.21.41.3
France10.92.71.81.61.7
Germany1.31.82.71.91.51.4
Iceland2.9103.432.52.8
Ireland272.71132.93
Italy10.91.71.21.11
Luxembourg3.253.23.12.93.2
Netherlands1.62.42.92.21.82
Norway0.2-0.83.62.21.91.9
Poland4.62.65.23.53.22.8
Portugal1.41.82.41.91.51.2
Spain3.63.23.12.321.7
Sweden4.62.62.62.222
Switzerland0.41.51.21.81.71.7
United Kingdom2.21.91.71.51.71.6
[Negative] Teg: United Kingdom

I think that the negative merchandise trade balance will remain the current account in deficit over 2018-2022, offsetting surpluses on the services account. More importantly I expect that UK economy will slowing down its growth since 2021 against the backdrop of the looser trade relations with the EU to mean a larger goods trade deficit and a smaller services surplus. Also I don't believe that UK's policymakers will be able to implement structural reforms in the near-term that have crippled the economy in recent years, including weak productivity growth, ineffective innovation and poor infrastructure. So my outlook on British economy is negative.

[Positive] Teg: Germany

Germany is in a boom phase, with growth rate ~2.5% (the highest since 2011, when growth rate was 3.7% on the back of post-crisis recovery). This growth is fueled by booming real estate market (due to low interest rates), global growth, increasing investments (due to capacity utilization is at the highs) and increasing domestic demand (due to increasing wages and decreasing unemployment which is at the lows). Fiscal policy is rather stable as well: moderate stimulus with budget balance in surplus. I assume that current growth of Germany is rather stable in near-term. However, in 1-2 years there is a risk that real estate market, one of the catalyst, would be overheated, thus, slowing down of growth is possible.

[Positive] Teg: France

France's recovery from its economic downfall in 2012 has been slow in comparison with the most of its European peers. However, according to the results of 2017 (GDP growth = 1.9%) the economic growth has showed the strongest growth since 2011. Taking into account the continued cyclical upturn in the euro zone and increasing of domestic demand, I expect annual growth to average 1.7% in 2019-2022. Also the main challenges for Macron's policy are to reduce the high rate of unemployment (especially among young people), increase competitive advantage, promote the economic growth, improve foreign investors' views about the French labor market, as well as develop the public finances. I believe in Macron's ability to achieve these goals, therefore I expect the reforms will start to gain traction towards the end of 2022.

[Positive] Teg: Switzerland

I think that Switzerland's economy will further benefit from export growth and higher domestic demand. Due to global growth and weak CHF, export growth perspectives are favorable (especially in pharmaceutical industry). That growth supports recovery in industrial activity (PMI is at its highest since 2010), unemployment reduction and growth in real investments from business (as utilized capacity ~80%). However, there is one weak side of Switzerland's economy that I want to mention. Previously, real estate boom was one of the key factors for economy growth. As a result of this boom, one might see that real estate market is imbalanced: declining demand (high household debt, tighter conditions on mortgages), increasing oversupply

[Negative] Teg: United Kingdom

After Brexit referendum in 2016 UK economy growth rate is constantly decreasing (2015 = 2.3%, 2016 = 1.9%, 2017 = 1.8%). And I assume that full negative effect from both Brexit and entrenched UK economy problems will be felt by UK only in 2019 (planned exit from the EU is March 2019). 1) Productivity problem. During last decade UK's productivity growth is constantly slowing down. As a result, Office for Budget Responsibility's long-term productivity forecast was halved down to 1.2%. 2) Higher inflation due to weaker sterling and, thus, weaker consumer spending power due to Brexit. I assume that weaker consumer spending power is the major cause of slower UK economy growth. One should note that this negative effect is partially offset by industrial production and export growth on the back of weak sterling and global growth. However, I believe that this positive offset will be quite limited as real investments will decline due to political uncertainty. Additional consequence of this factor is accelerating (double-digit) growth in unsecured lending (however, current level of consumer debt to GDP is still below pre-crisis level). 3) UK/EU deal uncertainty. UK wants to maintain a special trading relationship with the EU after leaving EU, but EU, obviously, does not want to give UK such benefits. I assume that negative outcome for UK is quite probable. As a result, additional slowing of UK economy in 2019 is highly likely

[Negative] Teg: Italy

I think that domestic demand growth in Italy and positive outlook for the euro zone economy will be completely offset by political instability in the country. Political uncertainty has increased the potential for financial volatility and could harm the current moderate economic recovery, as well as further postpone of structural reforms at least in the short term. In spite of the possible support by the EU, Italy's high public debt and political instability will continue to give rise to concern for the major euro zone creditor countries, as well as put pressure on stability in the EU and financial sector.

[Positive] Teg: Germany

In spite of the current tense relations within the EU, Germany is likely to remain the most powerful economic and political player in the EU due to the structural elements supporting German power within the bloc and most importantly its dominant economy. In my view Germany will continue to demonstrate huge trade surpluses, reflecting the competitiveness of its manufacturing sector and comparably low levels of domestic consumption and investment. This will continue to generate large domestic savings that are generally investing to another countries, providing a a strong primary income surplus. I expect the current-account surplus to remain solid, decreasing consistently to just above 6% of GDP by 2022. As well as I expect that average annual inflation will be at the level of 1.7% in 2018-2022.

[Negative] Teg: France

The government of France recently announced to raise energy and tobacco taxes pursuing to make growth reliing on green sectors and enhance the healthcare. The vogue for electric-car are growing fast. The fiscal stance is projected to be largely neutral over the projection horizon

[Negative] Teg: Switzerland

Interest rates in the country are -0.75%, holding cash in bank cost people money. They need to reconsider monetary and fiscal policy to boost growth. Negative rates are widely criticized, I also would argue on the efficiency of such a policy

[Negative] Teg: Sweden

Growth will likely remain in 2018 as it was back to 2017. With interest rates in the country at -0.5%, holding cash in bank cost people some money, curiously but true. They need to reconsider monetary and fiscal policy to boost growth. Negative rates are widely criticized but Sweden seems not to turn against negative rates, as they just do not want to cap output and lessen real wages. I would argue on the efficiency of such a policy (this only gives the opportunity to earn by the government with tax and lessened obligations to pay on any debt - Sweden officials are collecting too much tax)

[Neutral] Teg: Germany

The main feature of German economy, as I think, is very high level of current accounts surplus (around 7-9% of GDP, this is one of the highest level within developed peers) This is one of the keys potential driver for economic growth. High surplus demonstrates that Germans and companies of the country still prefer to save rather than invest. The government should offer Germans some incentives to invest. Why not to increase a little bit of inflation (e.g. steady increase in wages, more government spending, etc.). I am sure this is like low-hanging fruits.

[Negative] Teg: Spain

I can not pick up drivers that might drive Spain economy in more that 1% real growth due to political uncertainty. Only positive signal is that the USA tax policy changes that would probable boost the recovery of global economy. Particular on Spain we all see the carelessness of official government. I would put negative estimate on Spain among others UN countries. But according to the European Commission, the Spanish economy will subsequently slow down its pace, falling to 2.1% in 2019 from 2.6% in 2018 (these figures are in line with official Spain government). This is too optimistic. They have nothing to do with high rates of unemployment (c.18-20% of labor force) and high level of debt (up to 100% of its GDP)

[Negative] Teg: United Kingdom

Private consumption slows due to increase of inflation which limits real spending's of households, all investments are depressed by Brexit. Gloomy projections of real GDP growth.

[Neutral] Teg: Netherlands

I would be moderate in forecasting the economy of Netherlands. The main drawback for me is that housing market slows in the begining of this year 2018 and thus the slowdawn of residential investments should be expected In overall I do not consider any other sound growth driver in Netherlands. Maybe wrong.

[Negative] Teg: Italy

Italy faces significant challenges this year and the next 2019. In most sources It is cited that Italy is the potential highest risk factor for the whole Eurozone. It is suffering from high level of public debt (140% of GDP as of Jan-2018), thus banking systems of Italy needs to be largely restructured (but impossible under Eurozone rules). Due to fundamental weakness of the economy, we can not expect any improvements in Mid-term horizon. Also, Political risks add more challenges, I mean that the leader of euro-sceptic Italy's Five Star Movement might come to power in May 2018, one of their hot idea is so-called Italexit seems to be likely, I mean the political actions about it, practically not (at the earliest in 2022). Also, as matter of fact at founding of Party in 2009 the party was anti-Vladimir Putin, but it has since become much more pro-Russia. More likely that after election the political process of independence and pro-Russia will be the same as in Greece. Over

[Positive] Teg: Germany

In most cases (I mean when reading articles written by analysts) the outlook for German economy is promising. They are assumed to implement the policy of wages increase, infrastructure projects. These would boost an inflation (what we know is not bad but indeed positive when it is moderate). The political elite I think must reduce the power of sanction against Russia, I calculated that Germany may easy earn min. 25-30 bn euro. Of course this lies on political grounds and indeterminable in mid-term future.

[Positive] Teg: Netherlands

Main drivers for the economy of Netherlands are private consumption and domestic investments. It is expected wage increase and unemployment rate decrease, this would support higher consumption for 2018-2019. As per the corporate level it is expected that businesses would invest more in PP&E due to its obsolescence and as it was announced by many public companies to increase the utilization of capacity rates as a result we would expect higher production output and thus, higher growth.

[Positive] Teg: Switzerland

I would suggest that in conformity with the manufacturing PMI (Purchasing Manager Index) which is at its highest since July 2010 and the services PMI also stands at very high levels. These leading factors give us positive signals for the economy of Switzerland in 2018-2019. Switzerland increases its export compared to others European countries. Internal consumption is expanding faster nowadays that in 2017 due to the decrease of unemployment rate and rising real wages. Thus, I think that real GDP of Swiss would show minimum 2% of growth in 2018

[Positive] Teg: France

I guess that economic growth of France has remained solid. The government plans: (a) to decrease the share of government spending by 3 p.p. (in terms of GDP) over the next 2 years (2018-2019), incl. cutbacks in subsidised jobs and housing subsidies, (b) to reduce corporate income tax from 33% to 25%, (c) to cut in capital income, wealth and taxes on property.

[Negative] Teg: United Kingdom

I would suggest that all situation over Skripal Case was done by internal forces of Great Britain itself, by the community against Teresa Mai. I believe that they just set her up (to make her as a scapegoat). This is the easiest way and method for internal political struggle. Well, this in coupe with high level of debt against European Union due to Brexit leaves us with no driver for growth in economy of Great Britain. At least, very modest opportunities.