There are no conclusive signs that a recovery in eurozone economic growth is imminent amid continued risks from global trade uncertainty, outgoing European Central Bank President Mario Draghi said as he defended a package of stimulus measures unveiled earlier this month.
The ECB on Sept. 12 downgraded its eurozone growth forecasts for 2019 and 2020, as it lowered the interest rate on its deposit facility and announced the resumption of bond purchases in a bid to boost economic activity and inflation.
Draghi said the growth slowdown in the eurozone is mostly due to the weakness of international trade, which is weighing on economic sentiment and the manufacturing sector.
"Looking ahead, recent data and forward-looking indicators – such as new export orders in manufacturing – do not show convincing signs of a rebound in growth in the near future and the balance of risks to the growth outlook remains tilted to the downside," Draghi said in a prepared statement for a European Parliament committee hearing on Sept. 23.
Draghi warned that the slump in manufacturing could spill over to the eurozone's services sector, which he said has been resilient so far.
"The longer the weakness in manufacturing persists, the greater the risks that other sectors of the economy will be affected by the slowdown," he said.
A survey compiled by IHS Markit showed earlier in the day that eurozone economic growth nearly halted in September after business activity growth across the 19-nation bloc unexpectedly fell, with the German manufacturing sector posting the sharpest decline since mid-2009.
Draghi said monetary policy should remain "highly accommodative for a prolonged period of time," and that the ECB is prepared to "adjust all of our instruments if warranted by the inflation outlook."
Meanwhile, ECB Governing Council member Klaas Knot, who has criticized the stimulus package, said policymakers should consider broadening its current inflation target of close to, but below, 2% in the medium to long term, due to the uncertainty about the impact of the central bank's policies, Reuters reported.
