2023-11-08 04:00:09
« So far, so good » : ” So far, so good. » It is with these cautiously optimistic words that Alfred Kammer, director of the Europe program of the International Monetary Fund (IMF), presents his institution’s new forecasts for the Old Continent, published Wednesday November 8. Indeed, it overcame the pandemic and resisted the energy shock caused by the Russian war in Ukraine better than expected, underlines the Washington organization. Thanks to that, “most European countries should escape recession”.
In detail, the IMF estimates that the euro zone economy should grow by 0.7% in 2023, including + 1% for France, + 0.7% for Italy − 0.5% for Germany – which is therefore not escaping the recession. For Europe in the broad sense, the IMF expects 1.3% growth. A “soft landing” compared to 2022, when growth in gross domestic product (GDP) was 2.7%, before the energy crisis and the tightening of monetary policy weighed on activity.
Unsurprisingly, industrial countries dependent on exports, such as Germany, suffered more than those focused on their domestic market and services, such as France or Spain. So far, so good, so… Even if these figures show Europe’s stalling compared to the United States, whose GDP is expected to grow by more than 2% in 2023.
A rebound in inflation is not excluded
For 2024, the IMF forecasts growth of 1.2% in the monetary union – a forecast in line with that of the European Commission –, + 1.3% for France, + 0.7% for Italy and + 0.9% for Germany.
“Inflation is finally showing signs of slowing”, he emphasizes, in the forecast document. If all goes well, this should continue to decline, going from 5.6% in 2023 to 3.3% in 2024, before slowly approaching the target of 2% in 2025. Result: the increase wages should more broadly support consumption and growth in the coming months.
But the risks weighing on this scenario are numerous. Starting with those linked to geopolitics, of course. “An escalation of Russia’s war in Ukraine and associated sanctions would disrupt trade, foreign direct investment and financial flows, threatening prospects for recoveries”analyzes the fund.
Despite the rise in rates, a rebound in inflation is therefore not excluded. “The Israel-Gaza conflict has already had an impact on energy prices, which might push up inflation in Europe more generally”, warns Alfred Kammer. At the risk of plunging the Old Continent into stagflation – that is to say, a harmful cocktail of low growth and high inflation.
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