Europe's economic growth trend is weakening despite recent decent performance and faces the triple challenge of containing inflation, sustaining economic recovery and maintaining financial stability, International Monetary Fund (IMF) officials said on Apr 14th.
Inflation remains in double digits in most emerging economies and some advanced economies in the European region, Alfred Kammer, director of the IMF's European Department, said at a press conference on the sidelines of the 2023 Spring meetings of the IMF and World Bank. Although energy prices have fallen, household spending is still rising rapidly.
The IMF expects inflation in the European region to average about 5.6% this year in advanced economies and 11.7% in emerging economies. Core inflation is expected to stay above the central bank's target until 2024. In addition, growth in Europe's advanced economies will slow from 3.6 percent in 2022 to 0.7 percent this year and 1.4 percent next year.
Mr Kammer said recent challenges to stability in Europe's banking sector and the wider financial sector were clouding the short-term outlook for economic growth. Tight labor markets, a resurgence in energy prices and heightened geopolitical fragmentation are among the factors that could hamper growth and lift inflation. Moreover, financial stability risks, if not effectively contained, could lead to crises and drag on economic growth.