BRUSSELS, Dec. 4 (Xinhua) -- Economic growth in the eurozone is expected to slow in the short term, with medium-term prospects remaining uncertain and dominated by downside risks, European Central Bank (ECB) President Christine Lagarde said in a parliamentary hearing on Wednesday.
Addressing the European Parliament's Committee on Economic and Monetary Affairs, Lagarde noted that after five quarters of stagnation, the eurozone experienced moderate growth in the first half of this year, driven primarily by exports and government consumption. However, domestic private demand has been weak due to heightened economic policy uncertainty and the lingering effects of past monetary policy tightening.
While third-quarter GDP growth reached 0.4 percent, partly due to temporary factors like the Paris Olympics, survey data indicate a slowdown in the services sector and a persistent contraction in manufacturing, signaling weaker short-term performance.
Looking further ahead, Lagarde stated that the euro area's economic recovery is expected to gain momentum. Consumer spending is projected to improve as real incomes rise, while investment is likely to recover as the effects of past monetary policy tightening fade.
Lagarde also emphasized the impact of geopolitical risks and mounting threats to international trade. She highlighted the eurozone's dependence on open trade and its integration into global supply chains, which leaves it vulnerable to external shocks, including potential trade barriers that could affect manufacturing and investment.
She said that although inflation rates have declined in recent months, they temporarily rose in the last two months due to slower decreases in energy prices and higher food inflation. On the whole, inflation is expected to rise slightly in the fourth quarter before returning to target levels next year.
The ECB's next monetary policy meeting is scheduled for Dec. 12, with economists widely anticipating a 25-basis-point rate cut, marking the fourth such cut this year.
