Europe Must Address a Toxic Mix of High Inflation and Flagging Growth

Authorities must tighten macroeconomic policies to bring down inflation, while helping vulnerable households and viable firms cope with the energy crisis

 
As Russia’s war in Ukraine takes a rising toll on Europe’s economies, growth is flagging across the continent, while inflation shows little sign of abating.

Europe’s advanced economies will grow by just 0.6 percent next year, while emerging economies (excluding Türkiye and conflict countries Belarus, Russia, Ukraine) will expand by 1.7 percent, according to projections in our latest World Economic Outlook. That’s down by 0.7 percentage point and 1.1 percentage points, respectively, from July’s projections.

This winter, more than half of the countries in the euro area will experience technical recessions, with at least two consecutive quarters of shrinking output; among these countries, output will fall, on an average, by about 1.5 percent from its peak. Croatia, Poland and Romania will experience technical recessions as well, with an average peak-to-trough output decline of more than 3 percent. Next year, Europe’s output and income will be nearly half a trillion euros lower as compared to the IMF’s pre-war forecasts—a stark illustration of the continent’s severe economic losses from the war.

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Πηγή: imf.org