IMF says Eurozone shows signs of gradual recovery
Date
7/31/2024 9:50:55 AM
(MENAFN) The euro area is showing signs of gradual recovery, with the International Monetary Fund (IMF) projecting modest acceleration in economic growth for this year and further improvement expected next year. According to the IMF's statement released on Tuesday, the ongoing recovery is supported by increasing real wages and a partial drawdown of household savings, which are boosting consumer spending. Additionally, the anticipated easing of financing conditions is expected to drive a rebound in investment activities.
The IMF noted that inflationary pressures in the euro area are easing due to the effects of monetary tightening and falling commodity prices. The gradual disinflationary trend is anticipated to continue, with inflation expected to return to target levels by the second half of next year. This reflects the positive impact of current monetary policies and declining costs of raw materials on overall price stability.
Despite these optimistic projections, the IMF highlighted several downside risks to growth. Past monetary policy tightening could exert a more substantial drag on economic output than anticipated. Moreover, adverse external factors, such as escalating geopolitical tensions or a slowdown in global demand, could also hinder economic expansion. The IMF's assessment acknowledges these risks while maintaining a cautious outlook on the euro area's growth prospects.
On the other hand, there are also upside risks to inflation that could complicate the economic picture. These include stronger-than-expected wage pressures or persistently high company profit margins. Additionally, potential spikes in commodity prices or disruptions in shipping could contribute to upward pressures on inflation. The IMF's statement reflects a balanced view of the economic landscape, considering both the positive recovery signals and the uncertainties that could influence future economic developments in the euro area.
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