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Moody's sees stable outlook for eurozone in 2019 despite slowing growth

Economic growth in the eurozone will decelerate to 1.9% this year amid uncertainties over persisting global trade tensions and policy direction, Moody's warned in a new report.

The rating agency said the outlook for eurozone sovereigns is stable and the region's projected economic growth rate "will remain robust enough to be credit supportive".

"However, mounting trade tensions and a slowing global economy are among prominent external downside risks to the benign macroeconomic conditions we see for the euro area this year," said Steffen Dyck, a vice president and senior credit officer at Moody's.

Growing internal political fragmentation among eurozone countries also raises concerns about the direction of economic policy, threatening business sentiment and investment, the rating agency said.

Moody's expects the eurozone-wide fiscal deficit to edge up to 0.9% of GDP in 2019, with about half of the sovereigns that make up the single-currency area posting deficits. The region's government debt burden is forecast to decline to 84% of GDP, still above the levels recorded before the 2008 global financial crisis.

"Elevated government indebtedness will remain a rating constraint for a number of euro area sovereigns such as Italy, Portugal and Spain," Moody's said.

As of Jan. 8, no eurozone sovereign has a negative rating outlook for the first time since 2007, according to Moody's. Fifteen sovereigns have stable outlooks and four have positive outlooks.