Significant fall in growth but no recession for Eurozone
Wednesday, 6 August 2008
BRUSSELS, Aug 5 (AFP): The Eurozone should escape a recession but growth is expected to fall significantly, the International Monetary Fund (IMF) said in a report published yesterday.
"Growth will likely slow substantially this year before reaccelerating" next year, the report from the IMF's executive board said.
The "central scenario" underlying IMF, EU and European Central Bank (ECB) projections "is for a significant slowdown, but no recession or prolonged period of sluggish activity," as seen in 2002-2005 the report said.
The IMF predicted 1.7 per cent growth in the 15-nation Eurozone this year and 1.2 per cent in 2009.
Those figures include "a deceleration in the course of 2008 and a re-acceleration toward trend during 2009," it added. Last year Eurozone growth was recorded at 2.6 per cent.
Eurozone inflation. at record highs due to high energy and food prices, "should fall appreciably from its current levels, although risks are high."
Eurozone inflation nudged higher in July to a record 4.1 per cent, according to a first official EU estimate last week.
The IMF here too sees a return to norms next year moving "to below two per cent some time in 2009," bringing it back in line with ECB targets.
The IMF admitted that the ECB itself and the EU find this target "slightly optimistic."
The Fund bases its predictions on energy and food prices stabilising next year.
However, an inflationary spiral, fuelled by high wage increases as consumers feel the pinch, remains a threat and therefore proactive measures are required, the IMF said in its report.
The ECB will hold its monthly meeting Thursday to fix interest rates.
Economists were predicting that the ECB would not make a move on rates after raising its main lending rate to 4.25 per cent last month to stem inflation.
"Growth will likely slow substantially this year before reaccelerating" next year, the report from the IMF's executive board said.
The "central scenario" underlying IMF, EU and European Central Bank (ECB) projections "is for a significant slowdown, but no recession or prolonged period of sluggish activity," as seen in 2002-2005 the report said.
The IMF predicted 1.7 per cent growth in the 15-nation Eurozone this year and 1.2 per cent in 2009.
Those figures include "a deceleration in the course of 2008 and a re-acceleration toward trend during 2009," it added. Last year Eurozone growth was recorded at 2.6 per cent.
Eurozone inflation. at record highs due to high energy and food prices, "should fall appreciably from its current levels, although risks are high."
Eurozone inflation nudged higher in July to a record 4.1 per cent, according to a first official EU estimate last week.
The IMF here too sees a return to norms next year moving "to below two per cent some time in 2009," bringing it back in line with ECB targets.
The IMF admitted that the ECB itself and the EU find this target "slightly optimistic."
The Fund bases its predictions on energy and food prices stabilising next year.
However, an inflationary spiral, fuelled by high wage increases as consumers feel the pinch, remains a threat and therefore proactive measures are required, the IMF said in its report.
The ECB will hold its monthly meeting Thursday to fix interest rates.
Economists were predicting that the ECB would not make a move on rates after raising its main lending rate to 4.25 per cent last month to stem inflation.