The IMF warns of the widening growth gap between the United States and Europe and calls for increased public investment in Europe. U.S. growth forecasts have been revised upwards, while the euro zone faces downward revisions as major economies such as Germany and Italy struggle to keep pace.
advertisementThe International Monetary Fund (IMF) has warned that the gap in economic growth between the United States and Europe is widening, and is calling for increased public investment in Europe to improve productivity and maintain competitiveness.
In its October World Economic Outlook, the IMF highlighted stronger-than-expected growth in the United States while the eurozone continues to face persistent economic challenges. Economists have warned that Europe risks falling further behind the global economy unless it significantly increases investment, particularly in infrastructure and green technology.
“The contrast between the euro area and the United States is important,” the fund said.
Growth forecast: US strength, eurozone struggle
The IMF raised its 2024 US economic growth forecast to 2.8%, an increase of 0.2%** from its July forecast. This upward revision reflects strong consumer spending and strong business investment, both of which continue to stimulate the U.S. economy. The forecast for 2025 has also been raised to 2.2%, an increase of 0.3% from the previous forecast.
In stark contrast, the IMF has revised down its growth outlook for the euro area. The euro area is currently forecast to grow by just 0.8%** in 2024, a decrease of 0.1% compared to the July outlook. Eurozone growth is expected to rise slightly to 1.2% in 2025, but the forecast has been revised downward by 0.3%.
Despite the positive outlook for the United States, the IMF expects growth to slow to 2.2% in 2025 due to tighter fiscal policy and a cooling labor market.
Major economies of the EU: Germany and Italy underperform
Among Europe's biggest economies, Germany and Italy are expected to significantly underperform. The German economy is expected to contract by 0.3% in 2024, and growth will be flat at 0% in 2025. Meanwhile, Italy's growth rate in 2024 is expected to be 0.7%, unchanged from July's forecast, with a slight decline to 0.6%. In 2025.
“A sustained weakness in manufacturing is weighing on growth in countries such as Germany and Italy,” the IMF said, noting continued tensions in industrial production and real estate.
While Italy is expected to benefit from the EU-funded National Recovery and Resilience Plan, Germany faces the combined pressures of fiscal consolidation and plummeting real estate prices, both of which are hurting economic performance. It is expected that
In contrast, France is projected to maintain stable growth of 1.1% in both 2024 and 2025, although the forecast for 2025 has been slightly revised downward by 0.2%.
Spain stands out as a top performer, with its growth forecast for 2024 revised upwards by 0.5% to 2.7%, with steady growth expected at 2.9% in 2025.
Call for increased EU public investment
To address Europe's slowing growth, the IMF is calling for increased public investment across the European Union.
The report entitled “The Future of European Competitiveness'', led by Mario Draghi, highlights the need for increased spending, particularly in infrastructure, green technology and productivity projects.
The IMF said the Draghi report provides a “clear-eyed assessment of the region's declining prospects and associated challenges.”
The Fund's analysis confirms these findings: If public investment increases by 1.5% between 2025 and 2030, euro area GDP could be up to 2.5% higher than the baseline forecast by 2030. It suggests that there is.
advertisementThis surge in investment would be financed by a combination of increased deficits and reallocation of existing government spending. The IMF predicts that such a strategy could significantly increase productivity, attract private investment, and help contain inflationary pressures.
Higher public capital spending could raise inflation in the euro area by about 40 basis points between 2025 and 2030, but the IMF believes the long-term benefits of higher growth and productivity outweigh these inflation risks. It suggests that he is deaf.
Diverging growth trends: Europe in crisis
As economic disparities between the United States and the eurozone persist, economists are calling on European policymakers to address underlying structural challenges.
While the United States is expected to maintain its growth momentum, Europe faces an even tougher road ahead.
advertisementWithout a significant increase in public investment, particularly in key areas such as green energy and digital infrastructure, Europe risks falling into a prolonged period of low growth and economic stagnation.
