The IMF expects the euro area to recover from 0.4% growth in 2023, rising to 0.8% in 2024 and 1.5% in 2025. Lower inflation could allow central banks to consider lowering interest rates, but tensions in the Middle East could push up oil prices and transport costs. worsen the economic outlook.
advertisementAlthough growth was only 0.4% in 2023, mainly due to the impact of the Ukraine conflict, the euro area is poised for a gradual recovery. The latest International Monetary Fund (IMF) estimates that it will recover to 0.8% in 2024 and 1.5% by 2025.
This increase is likely to be driven by a recovery in household consumption, supported by subsidence in energy price shocks and falling inflation, which will collectively boost real income growth in euro area countries. .
Spain is expected to lead the way with strong growth rates, with an expected expansion of 1.9% in 2024 and 2.1% in 2025. In contrast, Germany's growth forecast for 2024 has been revised down to just 0.2%, down 0.3 percentage points from the previous forecast. Similarly, growth expectations for the coming years have been lowered for France and Italy.
US growth continues to outpace Europe
The global economy is expected to continue on its current growth trajectory over the next two years, matching the pace of 2023, with the 2024 growth rate revised slightly upward to 3.2%.
In particular, the US economy is expected to significantly outperform the euro area, with growth forecasts for 2024 revised upward by 0.6 percentage points to 2.7%, and growth forecasts for 2025 revised upward by 0.2 percentage points to 1.7%. It was 9%.
Lower inflation due to lower interest rates
The global headline inflation rate is projected to decline from an annual average of 6.8% in 2023 to 5.9% in 2024, and further to 4.5% in 2025.
In the euro area, inflation is expected to fall significantly from 5.4% in 2023 to 2.4% in 2024, reaching 2.1% by 2025. With inflation close to target and long-term expectations stable, major central banks: It is likely that policy interest rate easing will begin in the second half of 2024.
By the fourth quarter of 2024, the Federal Reserve's policy rate is expected to fall from around 5.4% to 4.6%, the Bank of England from around 5.3% to 4.8%, and the European Central Bank from around 4.0% to 3.3%. ing. In line with IMF forecasts.
Geopolitical risks complicate the outlook
“The conflict between Gaza and Israel is likely to spread further,” the IMF said.
These increases could push oil prices up by 15% and average container shipping costs by 150% from 2024 to 2025. These increases are expected to primarily affect transport routes from Asia to Europe.
The result could be a tightening of monetary policy, with interest rates in developed and emerging markets around 30-40 basis points above the baseline by 2025, reducing global economic activity by up to 0.4% by the same year. there's a possibility that.
Specifically, “Among developed countries, the impact is slightly greater in Europe than in the United States because of the greater impact of transportation costs.''
