IMF warns of recession in Europe by 2023

Washington. The slow pace of economic growth in parts of Europe threatens to become recession throughout the continent, at a time when the interruption of energy supply and the cost of living crisis are fueling social tensions, the International Monetary Fund (IMF) warned yesterday.

Germany and Italy will enter recession next year and will be the first advanced economies to experience slowdown after the war in Ukraine, the agency said, as it warned earlier this month.

The IMF predicted that the German economy – the largest in Europe – will contract 0.3 percent in 2023, greatly affected by its dependence on Russian gas, after Moscow cut off supplies to Europe in alleged retaliation for Western sanctions. for the conflict.

Italy, whose industries also depend on gas imports, will suffer a 0.2 percent contraction in its gross domestic product (GDP), says the IMF in its Regional Economic Outlook Report on Europe, that for the set of European advanced economies a reduction in growth is expected to 0.6 percent.

While for the emerging economies of the region – excluding the countries in conflict and Turkey – it will fall to 1.7 percent, he predicted. While the losses in the countries in conflict will be big ones.

High inflation and energy crisis

The new IMF report comes as countries grapple with high inflation and a worsening energy crisis, which have depressed household purchasing power and raised business costs. The new support from the authorities compensates only in part these tensions, considered the financial institution.

The European outlook has darkened considerably, with growth set to slow sharply and inflation remaining elevated, so under the current circumstances, central banks should continue to raise interest ratessaid the IMF, and asked faster increases in advanced economies.

Those who carry out the policies must walk a fine line between fighting inflation and supporting vulnerable households and businesses during the energy crisis.” He added that a key short-term risk is a further disruption to the energy supply, which, combined with a cold winter, could lead to gas shortages, rationing and deeper economic suffering.