Clouds on the horizon are also getting darker, the commission said.
"The commission will continue to monitor closely the situation in Italy", said EU Economic Affairs Commissioner Pierre Moscovici, who handles the fraught negotiations with Rome.
In a further concern for the ECB, the Commission expects euro zone inflation to be at 1.4 percent this year, below ECB estimates of 1.6 percent rate, and further away from the bank's target of a rate close to 2.0 percent. The Eurozone banks had recovered after six straight session of losses, in the wake of a sagging economy and dovish ECB stance, posted a rise of 1.7 percent. 2019 is expected to be the seventh straight year of economic growth. Accordingly, global stocks are trading mostly down in pre-market.
President Donald Trump said on Thursday (31 January) he wanted a "very big deal" U.S. trade deal with China, but signaled there could be delays if negotiations fail to meet his goals of opening the Chinese economy broadly to USA industry and agriculture. "We will see that flow through into a weaker euro".
On that front, Commission forecasters also warned that the domestic drivers of the expansion in the euro area have "softened". An expected slowdown in the largest countries of the bloc triggered the downgrade.
For the European Union, Brexit remains a source of uncertainty, the commission said.
Improving labour market conditions, low financing costs, and a slightly expansionary fiscal policy over the course of the next year should allow for more positive, albeit moderate, results by the end of 2019, Moscovici said.
The European powerhouse was particularly hit by the disruption of its automotive industry last autumn, as its vehicle industry struggled to win new certifications under a new emission testing procure.
The EU's executive Commission cut the forecast for this year to 1.3 percent from 1.9 percent in their earlier forecast last autumn.
"Yellow Vest" protesters stage a demonstration in Bordeaux, France, on the 12th consecutive Saturday of rallies last weekend. That said, several of the EU's larger members are expected to experience a noticeable slowdown in their economies with both France and Germany becoming increasingly concerned about their budget policies and Italy officially entering into a recession.
Italy was the first European economy to enter a technical recession a year ago, after registering two consecutive contractions in the last two quarters. Global trade uncertainty and a sharper-than-expected slowdown in China also pose external risks to the economic outlook. "Growth should rebound gradually in the second half of this year and in 2020". However, the Spanish economy will weather the uncertainty better than other major economies. The GDP will increase, therefore, in the country in 2019 by only 0.2 percent. However, it underlined that forecasts on Britain are based on the "technical assumption" that EU-UK trade will not be affected by Brexit. Its economy is now expected to grow by 1.3% this year and the next.