WASHINGTON, Europe continues to experience “strong growth” due to domestic demand in which the forecast for growth is expected to stay strong and reach 2.6 percent in 2018 but decline to 2.2 percent in 2019, according to a report by the IMF published Tuesday.
“Amid the good times, however, fiscal adjustment and structural reform efforts are flagging,” the IMF said in its May 2018 Regional Economic Outlook for Europe.
Real GDP increased by 2.8 percent in 2017, up from 1.8 percent in 2016.
“Credit growth has finally picked up, which is helping Europe’s banks rebuild profitability. While leading indicators have recently begun to ease, they remain at high levels,” it added.
Inflation and wage growth remain “subdued” in most advanced economies and are projected to “gather place only very gradually.” However, in central and eastern Europe, economies are much further ahead where wages are growing rapidly and inflation is expected to pick up in 2018.
“The subdued wage dynamics in many advanced economies reflect low inflation and inflation expectations, still-high unemployment and underemployment rates, as well as sluggish productivity growth,” it said.
Risks remain and the main downsides are seen in the medium term. The most pressing risks are from “rich valuations in financial markets at the global level, notably an exceptionally low term premium and a growing tendency toward inward-looking economic policies,” the report warned.
Due to a bright short term and less favorable medium term, the IMF recommended for “policymakers should seize the moment to rebuild room for fiscal maneuver and push forward with reforms to boost growth potential”.
It added, “In countries where inflation is still subdued, monetary policy should continue to be supportive to ensure a durable increase in inflation to targets”.
Source: Kuwait News Agency