The International Monetary Fund is slightly more optimistic about the eurozone’s economic growth this year, now forecasting GDP growth of 0.7% and ruling out a recession in Germany and Italy.
In its update to its “Global Economic Forecasts” (WEO, for its acronym in English), the International Monetary Fund (IMF) forecasts that the eurozone economy will grow by 0.7% this year, 0.2 percentage point ( pp) more than estimated in October, but below the 3.5% expected for 2022.
The upward revision, according to the IMF, is justified by the effects of the rapid rise in interest rates by the European Central Bank (ECB) and the erosion of real incomes, offset by the lingering effect of the 2022 results, lower energy prices and additional support announcements in in the form of energy price controls and money transfers.
As for 2024, the institution led by Kristalina Georgieva is slightly more pessimistic, lowering the projection by 0.2 percentage points to 1.6%.
Among the eurozone’s major economies, the “dark clouds” that plagued Germany’s gross domestic product (GDP) outlook have eased: for this year, the IMF has revised it upwards by 0.4 percentage point. the forecast compared to October, for growth of 0.1%.
The forecast puts the German economy in stagnation, but already rules out a recession from the central scenario. A similar result for the Italian economy, whose outlook was revised upwards by 0.8 percentage point to 0.6%.
According to the report, Germany is expected to grow 1.4% in 2024 (-0.2 pp. vs. October) and 0.9% for Italy (-0.4 pp. vs. October).
The IMF maintains its forecast for growth of 0.7% this year and 1.6% in 2024 for France.
On the other hand, the Bretton Woods institutions see the Spanish economy grow by 1.1% in 2023 (-0.1 pp. than before) and 2.4% in 2024 (-0.2 pp. than before) .
The report also highlights that European economic growth in 2022 was more resilient than expected in light of the large negative terms of trade shock caused by the war in Ukraine.
This resilience – visible in the third quarter consumption and investment data – partly reflects government support of around 1.2% of EU GDP for households and businesses affected by the energy crisis, as well as the dynamics of the reopening of economies,” he explains, adding that gas prices have fallen more than expected.
However, he warns that the momentum for reopening “appears to be waning”, illustrating that high-frequency indicators for the fourth quarter point to a contraction in the manufacturing and services sectors, while consumer and business confidence have deteriorated.
In addition, “with inflation at around 10% or more in several countries in the Eurozone and in the United Kingdom”, he emphasizes that state budgets remain “tight”.
At the same time, “the accelerated pace of rate hikes by the Bank of England and the European Central Bank (ECB) is tightening financial conditions and reducing demand in the real estate sector”.
Source: DN
