U.S., WASHINGTON, April 19. Europe needs to focus on deepening the single market, said Alfred Kammer, Director of the European Department of the IMF, during a briefing on the Regional Economic Outlook for Europe held as part of the IMF Spring Meetings in Washington, Trend reports.
“IMF forecasting on Europe is in a soft landing, but that is not guaranteed. What we saw was rapid inflation over the last year, and we are now forecasting a recovery. We are expecting an investment-driven recovery. We also see rate cuts ahead, but it will be more gradual in terms of what we are seeing in achieving the inflation target in the Euro area,” he said.
Kammer believes that budgetary action is required to meet climate and other spending needs.
“We look at where Europe is currently with regard to the global frontier in terms of output and welfare. When you're looking at the global frontier, in terms of GDP per capita and purchasing power, Europe is 1/3 lower than the US, which has not always been the case. And when we are looking at the explanatory factors where this is coming from, this comes mainly from lower productivity in Europe versus the US. That means Europe needs to focus on productivity in order to close this gap with the US,” he noted.
Kammer pointed out that productivity growth will face a lot of headwinds and is not able to close this gap in the forecast horizon.
"Therefore, additional actions are required, and our recommendation to Europe is to focus on building out and deepening the single market. The single market was a growth booster in the 1990s, and there is much to do in terms of further integration. It is not just capital markets and banking unions; it is border infrastructure. When we did the study, the bottom line was to reduce those barriers in the single market by 10 percentage points. The boost to GDP will be 7 percent in terms of level, and that is a large number,” he said.
Kammer believes that the deepening of the single market will also be a response to the more difficult economic environment because Europe is going to build resilience in the single market by deepening it and making the economy more robust.
The Spring Meetings of the International Monetary Fund and the World Bank Group kicked off on April 15.
The main ministerial meetings and events will take place April 17-19 with other events and activities taking place during the week, April 15-20.
At the heart of the gathering are meetings of the joint Development Committee and the IMF's International Monetary and Financial Committee, which discuss progress on the work of the World Bank Group and the IMF.
The Spring Meetings bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.