The signs of “recovery” of the euro area economy at the end of last year and the start of 2015 leave the International Monetary Fund (IMF) slightly more optimistic about the growth of the single currency this year, but not enough to overcome the “fragile” progress in economic activity.
After a growth of 0.9% in 2014, the institution led by Christine Lagarde expects the euro economy to grow 1.5% this year, 0.3 percentage points compared to that forecast in January, when which lowered its estimate.
With the publication of yet another part of the report World Economic Outlook on Tuesday, the fund has revised upwards the projection for the all the 19 euro countries, but remained unchanged the forecast for the world economy, expecting a growth of 3.5%
What makes the IMF a little more optimistic about the euro zone -. even if growth in 2014 has disappointed, despite the improvement in economic activity in the final stretch of the year – is the recent evolution of the economy, with the consumer to benefit from oil price decrease (a 45% decline since September) and increased exports.
Improving the activity, said the IMF also influenced wage increases and the action of the European Central Bank (ECB), whose program of buying financial assets the institution led by Lagarde considers “decisive “to combat low inflation.
But for the Spring Meetings of the World Bank and IMF, which take place within days in Washington, the fund’s economists continue to point some risks overshadowing the European economy :. a long period of weak growth and low inflation
Another weakness has to do with the uneven pace of investment between countries (except Ireland, Spain and Germany, says the institution, investment levels are still fragile). One of the priorities, emphasizes the institution, includes efforts in structural reforms promoting increased productivity and make room for investment.
According to the IMF, it is necessary that the largest economies in the euro do more to their budget are more conducive to economic stimuli and reducing external surpluses (which would mean potentially stimulate other economies in the single currency, including the periphery). Germany is not mentioned by the IMF when the institution refers to surplus countries, but it is implied in the subtext, especially after Brussels (even during the Barroso Commission) have pointed out the trade surplus and the current account’s largest economy as one of the points imbalance for the stability of the euro.
“a comprehensive strategy to reverse the low inflation in the euro area and combat stagnation is needed,” emphasizes the IMF. For background, not just wait for ECB action results in the first month they launched the public debt purchase (March) acquired more than 60,000 financial assets.
The countries with some margin budget, the IMF insists, must do more to accelerate growth, notably in infrastructure investments. Countries with limited fiscal space should use “new flexibility” of the Stability and Growth Pact to launch investments and structural reforms, giving priority to “friends fiscal policies of growth.”
According to the IMF whose recommendations are general for the euro area, not seeking any country in particular, should be implemented “structural reforms” which increase productivity and growth in the medium term and revive investment. Among the priorities are to enhance the flexibility in the labor market, remove barriers to investment and increase the integration of the single market.
Fourth economy, first in growth
In the report, the IMF does not provide forecasts for Portugal. The scenarios that traces are for the major regions of the world and the major economies of each.
Within the euro, Germany is expected to grow 1.6% in 2015 and 1.7 % next year. For France, the second economy, the IMF expects a growth of 1.2% this year and 1.5% in 2016. In the case of Italy, the third economy, the IMF expects growth of 0.5% followed by a variation of 1.1%. The growth is more robust to the fourth largest economy, Spain, with a forecast of 2.5% this year and 2% next year.
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