IMF projects a challenging medium-term outlook for the euro area

The International Monetary Fund (IMF) expects a moderate increase in growth in the euro area this year, strengthening further by 2025, but anticipates persistent challenges in the medium term.

According to the IMF’s concluding statement on common policies for member countries in 2024, the euro area is poised for a consumption-driven recovery, supported by rising real wages and reductions in household savings.

In 2025, improved financing conditions are projected to stimulate investment, alongside robust employment and wage growth sustaining consumption.

The IMF forecasts inflation to return to target by the second half of 2025, attributing recent declines in commodity prices and ongoing monetary policy adjustments for curbing inflationary pressures.

However, downside risks to growth persist, particularly from tightened past monetary policies and external uncertainties such as geopolitical tensions or weakened global demand.

The IMF also highlights challenges in enhancing productivity growth and calls for increased financial market integration and deeper reforms to bolster Europe’s economic resilience and global competitiveness.