ECB: March Projections: Export Growth Weighed Down By Uncertainty

The ECB revised its growth projection a shade lower through 2027 in its March projections. As highlighted in the March policy statement and President Lagarde’s press conference, “persistently high geopolitical and policy uncertainty is expected to weigh on euro area economic growth, slowing down the anticipated recovery”. 

• The projections include the impact of initial tariffs on trade between the United States and China (10% on all goods), but do not account for tariffs on Mexico/Canada, the additional 10% tariffs on China, nor the prospect of future barriers on the EU.
• In light of higher uncertainty, the main downward revision was seen in the exports component, particularly in 2026.
• The ECB continues to have confidence in its projection for a consumption-led recovery (resulting from rising real wages and employment growth). The quarterly consumption growth projections were little changed through the forecast horizon.
• On fiscal policy, “the discretionary fiscal policy measures point to some fiscal loosening” relative to December 2024, but the projections of course do not account for the latest German/EU fiscal announcements.
• On monetary policy “The impact on growth of past monetary policy tightening is estimated to have peaked in 2024 and is expected to fade away over the projection horizon”.