According to the International Monetary Fund, the European economy can come out of the crisis well – although the IMF warns of “crosswinds”.
A so-called soft landing is within reach, but not guaranteed, said the director of the European Department of the International Monetary Fund, Alfred Kammer, at the spring meeting of the IMF and World Bank in Washington. This means that the recent high inflation can be overcome without major economic upheavals. However, it could be difficult to achieve price stability while ensuring a lasting recovery, the fund said. Kammer also emphasized that Russia’s invasion of Ukraine was “a major shock to the economy” with regard to European energy security.
“Europe must increase its growth potential”
The labor market must cool down sufficiently and at the same time increasing consumption must stimulate private investment, said Kammer. Europe must increase its growth potential. The IMF warns that the soft landing in the industrialized nations, which includes Germany, could be canceled out by the fact that consumption does not pick up as the bad mood continues. This would also have a negative impact on investments. The IMF is forecasting economic growth of 0.8 percent for the industrialized nations of Europe this year, which is 0.4 percentage points less than predicted in October. Next year, growth is expected to be 1.6 percent.
“Growth can also surprise positively if consumer confidence recovers quickly with continued high wage growth,” says the experts’ current analysis. Low potential growth remains Europe’s “Achilles heel”. This refers to the growth of the economy with normal utilization of all capacities – i.e. without short-term economic fluctuations. At the same time, the IMF emphasizes that central banks should take a measured approach to easing monetary policy. Interest rate cuts should not be made too quickly or too slowly. “However, Europe has shown that it can overcome even the greatest obstacles if it acts decisively and together.”
The IMF presented its global economic forecast at the beginning of the week and had no good news for Germany. The IMF forecast economic growth of 0.2 percent for the current year. In January, the IMF had expected an increase of 0.5 percent. For 2025, however, the fund expects the German economy to grow by 1.3 percent again.
