Economy.- The IMF raises its forecast for growth in Europe, but questions the long-term sustainability of the rebound

Christine Lagarde has revised up its growth projections for the advanced economies

Economic growth

The International Monetary Fund (IMF) has improved its forecast of real economic growth for Europe by five tenths in 2017, up to 2.4%, compared to the 1.9% estimated last April, and has also reviewed two-tenths of a second hires its forecast for 2018, up to 2.1%. At the same time, it has maintained the 1.9% expansion estimated for 2019 unchanged.

Similarly, the body chaired by Christine Lagarde has revised up its growth projections for the advanced economies of the Old Continent and the eurozone to place them at the same pace of expansion for the current year and the next two years. Thus, it forecasts that they will grow to 2.1% this year, to 1.9% in 2018 and to 1.7% in 2019.

The emerging economies of Europe, on the other hand, will grow in a more “robust” way, since the IMF points out that the Gross Domestic Product (GDP) of these regions will grow by 3.1% in 2017, 2.6% in 2018 and 2.5% in 2019.

Europe’s economic recovery is strengthening and expanding in an “appreciable” way, which is why, as the international organization has stressed, it has decided to make “big upward revisions”.

“The European recovery is spreading to the rest of the world, contributing significantly to global growth, and in some advanced economies and in many emerging economies, unemployment rates have returned to pre-crisis levels,” the document said.




However, the IMF notes that in many parts of Europe, wage growth is “slow” despite the decline in unemployment and, while the risks seem more balanced in the short term, they are still tilted down in the medium term. Thus, although it predicts that the recovery may finally be “stronger” than projected in the short term, the sustainability of the rebound is still in question.

“In the long term, adverse demographic trends and low productivity are likely to slow growth, and the outlook is also subject to a number of important internal and external risks,” says the IMF. Therefore, it believes that policymakers should take advantage of current favorable conditions to rebuild fiscal reserves and improve the economy’s ability to grow and absorb shocks.

In this regard, he believes that the reduction of public deficits is one of the main tasks on which many economies should focus, and warns those governments with a high debt of the particular importance of this, given the foreseeable future scenario of interest rates. higher interest. Here it situates several advanced economies such as Spain, Belgium, France, Italy, Portugal or the United Kingdom, which have high rates of public debt and very limited fiscal spaces.

With regard to countries with stronger fiscal positions, he advises that they use the fiscal space available to raise growth potential and support structural reforms. It also advocates that structural policies “revitalize” convergence, which ensures that it has slowed down after the crisis.

In particular, the IMF recommends advanced economies to progress more rapidly in the implementation of structural reforms that increase productivity growth, making product markets more competitive and improving labor markets, as well as prioritizing investment in education and training.

As for the “legacies of the crisis”, as the monetary institution qualifies the countries that still carry the aftermath of the recession, it considers it necessary to prioritize the clean-up of the balance sheets of its weakest banks.

In this regard, the IMF points out that in advanced Europe, non-performing loans (NPLs) have been reduced by approximately 160,000 million euros – especially in households – since their peak in 2003. 2014- Lips Tokyo check my blog. However, it warns that the total stock is still high, reaching just under 1 trillion euros. Spain and Ireland account for much of the reduction in this type of loans, while the recent sales rebound of NPL in Italy is “encouraging”.




In general, the IMF considers it essential to strengthen the capacity of the European Union to adapt and, in particular, in the eurozone, to the ‘shocks’. As he points out, this requires completing the unions in the banking and capital markets, and building fiscal support to provide a macroeconomic stabilization mechanism.

At the same time, he believes it is necessary to act on banks that still present themselves as “problematic” and strictly apply the common fiscal rules. It also points out that reforms should focus on strong competition policies, lower trade barriers and redistributive fiscal policies that expand opportunities.

He further argues that public officials should be selected and promoted in their job by their own merit, and asserts that freedom of information and transparency about the performance of governments, the use of public resources or interests are guaranteed. financial