IMF More Gloomy About Economic Growth in the Eurozone

The International Monetary Fund (IMF) has become more gloomy about the growth of the eurozone economy. This is partly due to Germany. Consumer sentiment in the eurozone’s largest economy has been under pressure for some time now.

The prospects for France also look less rosy than in the previous significant economic forecast in January. The IMF already lowered its growth forecast for the Netherlands twice earlier this year, but that prognosis has not changed now.

The UN Financial Stability Organization predicts 0.8 percent growth for the euro area economy this year. Next year, the size of the economy should increase by 1.5 percent. This amounts to downward adjustments of 0.1 and 0.2 percentage points, respectively.

IMF chief economist Pierre-Olivier Gourinchas emphasizes that growth in the eurozone was minimal last year. “Growth in the eurozone will recover from deficient levels, as previous shocks and tight monetary policy weigh on activity.”

The European Central Bank (ECB) has set interest rates at their highest level for some time, making borrowing relatively expensive. Gourinchas says that inflation is now coming down, but it is still possible that price increases will rise again.

IMF CEO Kristalina Georgieva said last week that European countries are still experiencing the aftereffects of the previously sharply increased energy prices. At the same time, she believes that the current policy is also much less successful in boosting productivity in this part of the world.

The figures vary significantly per country. In Germany and France, for example, growth this year and next year will be 0.3 percentage points lower than expected.

In February, the IMF lowered its growth forecasts for the Dutch economy for the second time in a short time. This year, 0.6 percent growth is expected, and next year, 1.3 percent.

The IMF has become more optimistic about the United States. The economic recovery there is going faster than previously thought, with an upward adjustment of 0.6 percentage points for this year. The estimates have also been increased for Russia and Brazil, among others.

The global economy will likely grow by 3.2 percent this year and by that percentage again next year. That is a bit better than the 3.1 and 3.2 percent pluses estimated in January.

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