The International Monetary Fund (IMF) has cut its growth forecast for the euro zone this year, as the continuing impact of the energy crisis and weak consumer demand raise concerns about the monetary union's economic resilience.
in report The IMF, released on Tuesday (January 30), predicted that the euro area would grow by just 0.9% in 2024, 0.3 percentage points lower than its October forecast.
The downgrade was mainly due to revised growth forecasts for the Eurozone's two largest economies, with Germany and France going from 0.9% to 0.5% and 1.3% to 1.0%, respectively. It was lowered.
This negative revision comes despite the fund raising its global economic growth forecast by 0.2 percentage points to 3.1%.
“Economic growth in the United States and several major emerging market and developing countries is estimated to have been stronger than expected in the second half of 2023,” the report said.
“Upper momentum is not felt everywhere, and growth in the euro area has been particularly strong, reflecting weak consumer sentiment, the lingering effects of high energy prices, and weakness in interest rate-sensitive manufacturing and business investment. It has slowed down,” he added.
“Sick Man of Europe”
Philipp Lausberg, an analyst at the European Policy Center (EPC), was similarly pessimistic about the eurozone's economic outlook. He expressed particular concern about its condition. german economywhich shrunk by 0.3% last year.
“Germany has become the sick man of Europe,” he told Euractic. “And it's not just a problem for Germany, it's a problem for Europe itself. There are many structural problems in Europe, but you can see that they are particularly concentrated in Germany.”
Rausberg pointed to a “chronic lack of investment.” lack of skilled laborand reduced access to previously abundant cheap Russian gas as a major factor contributing to Germany's economic decline.
“Many of these developments will continue for the long term,” he says. “I don't think the outlook is that good in the long term, or medium to long term.”
Why are you optimistic?
However, Zsolt Dalbas, a senior fellow at Brussels-based think tank Bruegel, said he remained “optimistic” about the eurozone's economic outlook, pointing to developments in the monetary union. record low unemployment rate Recent improvements include: energy efficiency as an important positive development.
Darvas also said it was “good news” that the IMF still predicted positive growth for the eurozone as a whole this year, underscoring the difficulty of making accurate forecasts in such a serious situation. geopolitical uncertainty.
““Even in good times without shocks, economic forecasts are often uncertain,” he told Euractic. “If you look at the IMF's forecasts in the past, they have never been accurate. There is always forecast error.”
“This time they revised down a little bit from their previous forecast. I don't think it's a big problem. The magnitude of the downgrade wasn't that large. And the forecast up until then was uncertain anyway. So, I’m not going to withdraw my optimism for a reason.”
A sign of resilience?
The IMF study was published on the same day. eurostatThe EU's official statistical office has reported that the eurozone has narrowly avoided falling into a technical recession at the end of 2023.
The study found that the euro area's quarter-on-quarter GDP has stagnated in the past three months of 2023, after falling by 0.1% in the third quarter. A recession is technically defined as two consecutive quarters of negative growth.
The eurozone as a whole grew by just 0.1% last year, compared to 0.2% for the EU as a whole.
In support of the IMF report, Eurostat revealed that the euro zone's poor performance was mainly due to Germany, which contracted by 0.3% quarterly in the last three months of 2023.
The question of whether the eurozone fell into a technical recession late last year is largely irrelevant, according to Darvas. “I don't think it really matters whether a particular quarter is +0.1% or -0.1%,” he said.
He also alluded to the fact that the European Central Bank (ECB) is expected to lower interest rates from current levels. Highest level ever There's another one later this year “Reason for optimism.”
Expectations for a rate cut further increased on Wednesday (January 31) after Germany's Federal Statistical Office reported that the country's inflation rate fell in January to 2.9%, the lowest since June 2021.
The ECB has raised interest rates 10 times in the past year and a half in an effort to curb the soaring prices triggered by Russia's full-scale invasion of Ukraine in February 2022. At its last meeting, it suspended interest rate hikes for the third time in a row. week.
Eurozone inflation is currently running at 2.9%, according to the latest data from Eurostat, below the October 2022 peak of 10.6% but above the ECB's target rate of 2%. There is.
[Edited by Nathalie Weatherald]
