Analysis
IMF Pessimistic About Europe's Economy
By The EUObserver
Sep 16, 2005, 09:04
The International Monetary Fund (IMF) has lowered its expectations for the EU’s economic prospects, cutting the growth forecasts for four big countries – Germany, France, UK and Italy - while presenting a more optimistic outlook for the US and Japan.
In its twice-yearly report, the IMF predicted Britain would see the highest growth of the European big four this year with 1.9 percent, but the figure is well down from the April forecast of 2.6 percent, according to the Financial Times.
France follows with 1.5 percent growth predicted for 2005, as opposed to 2 percent suggested earlier. The outlook for 2006 puts the figure down from 2.2 to 1.8 percent.
The IMF is not very optimistic about the chances of the new German cabinet reversing the gloomy trends, suggesting the country’s economy will grow by 0.8 percent this year (compared to an earlier estimate of 1 percent), but reversing its prediction from 1.9 percent to 1.2 percent in 2006.
Finally, Italy features at the bottom of the blacklist, with its zero growth predicted for 2005, down from 1.2 percent.
By contrast, the IMF expects Japan’s economy to grow by 2 percent in both 2005 and 2006, with US predictions of 3.5 percent (2005) and 3.3 percent (2006).
Analysts suggest the pessimistic picture is linked to Europe’s vulnerability to oil price shocks.
But the Washington-based body suggests eurozone countries should boost growth and domestic demand, as well as continue structural reforms, like those that are already proving beneficial for France, Italy and Germany.
IMF experts also argue that key eurozone players should pave the way for more competition in services, and increase their labour markets' flexibility.
