Economy
IMF: Structural change and tariffs meet Europe’s economy
The European economy is expected to grow more slowly this year than in January. The reason for this is the trade dispute with the USA. But Europe’s economy has other problems.
The huge US tariffs and the associated uncertainty put a strain on the European economy. The new environment falls into a period of profound structural changes in Europe, according to the International Monetary Fund IMF. The population older and the emergence of new technologies has the potential to change entire industries and services. In addition, the energy costs have increased significantly. Europe must concentrate on “growth and resilience” and implement reforms in order to release growth potential and make the economy more robust.
The IMF recently reduced the outlook for the euro zone in its global economic forecast on the occasion of the spring conference in Washington, mainly because of the customs disputes. Economic growth in the euro area is expected to drop 0.2 percentage points to 0.8 percent compared to the January forecast. In the coming year it will be 1.2 percent (minus 0.2 percentage points). For Germany, the IMF predicted zero growth this year.
Customs could bring more imports from China
The high tariffs between the United States and China may bring additional imports to Europe, according to the IMF. The preliminary estimates assume that imports from China will increase by around 0.25 percent of the EU gross domestic product of the EU at short notice. A trading out of trade would probably also reduce the manufacturing costs for European companies and the prices for consumers.
However, new public expenses such as the German billion-dollar finance package for defense and infrastructure and increased defense spending throughout Europe supported demand in the future, according to the IMF. “Overall, the influence of these additional expenditure on GDP growth in the euro area is 0.1 and 0.2 percentage points in the years 2025 and 2026.”
dpa
Source: Stern
