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European Central Bank Governing Council member Francois Villeroy de Galhau expressed some optimism about the euro-area economy, reiterating a projection that foresees growth rebounding later this year.
Recent indicators “point to substantially weaker than previously expected activity in the first half of 2019,” Villeroy, who is also governor of the French central bank, said in a speech in New York on Monday. “But, looking ahead, the baseline scenario in the ECB March forecast assumes a gradual dissipation of global and domestic headwinds, allowing the fundamental factors supporting the euro-area expansion to regain traction from the second half.”
The comments come after Europe’s economic distress was one of the key topics debated during the International Monetary Fund’s meetings last week. The Washington-based lender had cut its projections for growth in the region once again after Italy succumbed to recession and Germany’s manufacturing slump -- partly driven by weakening export demand -- reverberated through the region.
“French growth is expected to prove more resilient to the global headwinds,” Villeroy said, predicting a 2019 expansion of 1.4 percent. “The deceleration in world demand is expected to weigh on activity, but due to the distribution of its foreign trade, France is less exposed to the downturn in global economic activity than some of its trading partners.”
Still, he urged the French government to pursue growth-enhancing reforms, while taking into account the need for more sustainable public finances.
Villeroy said the ECB is “clearly determined to maintain an ample degree of monetary accommodation for as long as necessary” to return inflation toward the institution’s goal of just below 2 percent. He see euro-area price growth slowing this year, before gradually recovering.
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