Written by Marcin Grajewski,
According to the IMF report, as in the rest of the world, European trade and manufacturing have weakened, with signs that the slowdown is spreading to the rest of the economy. The optimistic signal is that services and consumption remain relatively resilient in line with strong labour markets and looser financial conditions that support domestic demand. However, investment is starting to lose steam. The IMF therefore predicts that growth will moderate from 2.3 % in 2018 to 1.4 % in 2019, its lowest rate since 2013. In 2020, growth is projected to recover modestly, to 1.8 %, as international trade is expected to rebound. Nevertheless, if trade disputes remain unresolved, the outlook could darken.
The IMF advises those countries who can afford to do so to implement fiscal stimuli, while highly indebted countries should move towards the EU-mandated Medium Term Objectives, which encourage them to adjust their structural budgetary positions at a rate of 0.5 % of GDP per year as a benchmark. The European Central Bank policy should remain accommodative, although caution is required thanks to strong labour markets and wage growth in some countries.
Othmar Karas, Vice-President of the European Parliament, in charge of relations, among others, with the IMF, opened the conference with a scene-setting speech, while Anthony Teasdale, ERPS Director-General, moderated the event. Other members of the panel included Robert Holzmann, Governor of the Austrian Central Bank, and Maria Demertzis, Deputy Director at the Bruegel think tank.
Vice-President Karas acknowledged that the European economic situation is not rosy. ‘The trade conflict, from which the USA has not spared Europe, lowers productivity by disrupting supply chains, causes turmoil on financial markets and reduces investment due to uncertainty. Foreign direct investment abroad by advanced economies came almost to a standstill’, he said. However, he noted that the EU is now stronger and more resilient than in the wake of the financial crisis, when some said that the euro area was in an existential crisis. ‘Our economy has grown for seven consecutive years, creating 14 million jobs. We mobilised considerable investment resources through the “Juncker Fund”‘ he said. Karas added that, in his role of Vice-President responsible for information policy, press and relations with citizens, he plans to organise a series of public seminars in national capitals, with the participation of organisations such as the IMF and the World Bank, to raise awareness of the common challenges and facilitate cooperation among governments.
The next joint EPRS-IMF event is planned for the first semester in 2020.