The European economy is well placed to bounce back from years of crisis, a leading International Monetary Fund figure said on Friday, while warning of disruptions to the continent's recovery.
The IMF is "forecasting a soft landing," said Alfred Kammer, the director of the agency's European Department, in remarks at the spring meeting of the IMF and World Bank in Washington.
"Policymakers did a remarkable job" in responding to the economic shocks brought on by the pandemic and Russia's invasion of Ukraine, but the "population clearly is still in pain," Kammer said.
Europe must tread a cautious path in encouraging a "consumption-driven recovery" without causing renewed spikes in inflation that could prevent central banks from cutting interest rates.
More broadly, Kammer highlighted the fact that Europe lags the United States in terms of purchasing power, blaming "lower productivity in Europe versus the US."
"Our recommendation to Europe is to focus on building out and deepening the single market," Kammer said, pointing to persisting areas of friction such as labour mobility and the mutual recognition of education certificates. Eliminating such barriers to growth could boost GDP by up to 7%, he argued.
The IMF is predicting economic growth of 0.8% for Europe's industrialized nations this year, which is 0.4 percentage points less than forecasted in October. Growth is expected to reach 1.6% in 2025.
Germany, Europe's largest economy, faces even stronger headwinds, with the IMF forecasting growth of only 0.2% in 2024, rising to 1.3% in 2025.
