Professional forecasters have cut their projections for euro area growth and inflation for this year and next, results of a quarterly survey by the European Central Bank showed on Friday. Annual HICP inflation is seen averaging 1.5 percent this year, the ECB Survey of Professional Forecasters for the first quarter showed. The projection was lowered from 1.7 percent seen in the fourth quarter survey.

The inflation forecast for 2020 was trimmed to 1.6 percent from 1.7 percent. For 2021, average annual HICP inflation was seen at 1.7 percent. Longer term inflation expectations, which refer to 2023, was lowed to 1.8 percent from 1.9 percent. In December, the ECB Staff predicted 1.6 percent inflation for this year, 1.7 percent for next and 1.8 percent for 2021. The downgrade to inflation projections likely reflected to a large extent downward revisions to the expected oil price as well as downward revisions to expectations for underlying inflation, the ECB said. The projected core inflation, which excludes energy, food, alcohol and tobacco, for this year was revised down to 1.3 percent from 1.4 percent. The forecast for next year was lowered to 1.5 percent from 1.7 percent.

Core inflation was seen at 1.6 percent for 2021. Longer-term outlook was cut to 1.7 percent from 1.8 percent.

"As with shorter-term inflation expectations, perceptions of overall uncertainty remained high, with the balance of risks remaining to the downside," the survey said. The real GDP growth projection was lowered to 1.5 percent from 1.8 percent for this year, and to 1.5 percent from 1.6 percent for 2020. Annual growth is seen at 1.4 percent for 2021. Longer-term growth expectations were trimmed to 1.5 percent from 1.6 percent.

In December, the ECB Staff trimmed the growth projection for this year to 1.7 percent from 1.8 percent. Growth was seen steady at 1.7 percent next year before slowing to 1.5 percent in 2021. Survey respondents largely attributed the downgrade in growth projections to disappointing economic data at the end of 2018 and therefore less momentum going into 2019, as well as lower global activity weighing on trade.

That said, many forecasters pointed out that they see the current slowdown in quarterly growth as partly driven by temporary special factors and expect some pick up during 2019.

"Risks to the forecasts for real GDP growth were seen as being to the downside, but have faded somewhat compared to the previous round, especially in the longer term," the survey report said. "Negative impacts from a hard Brexit were the most cited downside risk," the report added.

On Thursday, the European Central Bank acknowledged that the balance of risks to Eurozone growth have moved to the downside. Further, forecasters listed a further escalation of the trade tensions between the US and China and the risk of stronger than expected slowdown in China and its spillover into emerging economies among downside risks.

On Monday, the International Monetary Fund said euro area growth is set to slow from 1.8 percent last year to 1.6 percent this year, which is 0.3 percentage points less than the previous projection. Growth was forecast to ease further in 2020 to 1.7 percent. The average unemployment rate forecast for this year was unchanged at 7.8 percent, while the projection for next year was revised up to 7.6 percent from 7.5 percent. The jobless rate for 2021 was forecast at 7.5 percent and the longer-term figure was unchanged at 7.5 percent.

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