Euro Area Policies: 2021 Article IV Consultation with Member Countries on Common Euro Area Policies-Press Release; Staff Report; and Statement by the Executive Director for Member Countries

IMF Staff Country Reports, February 7, 2022

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Euro Area Policies: 2021 Article IV Consultation with Member Countries on Common Euro Area Policies-Press Release; Staff Report; and Statement by the Executive Director for Member Countries

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Bibliographic details

• Published: February 7, 2022
• Series: IMF Staff Country Reports
• DOI: https://doi.org/10.5089/9798400200809.002

Outlook and near-term recovery

• Following a deep recession in 2020 and further contraction in 2021Q1, the euro area economy recovered rapidly in the second and third quarters thanks to high vaccination levels, increasing household and business adaptability to the virus, and continued forceful policy support.
• The recovery is set to continue in 2022 as the impact of the pandemic on economic activity continues to weaken over time and supply-side constraints ease.
• Near-term headwinds likely to affect growth:
  • supply chain disruptions
  • elevated energy prices
  • resurgences of Covid-19 cases—including those related to the Omicron variant

Inflation and price pressures

• Price pressures are building up as production bottlenecks are set to persist for a while.
• Inflation—despite increasing significantly in recent months due to transitory factors—is projected to moderate during 2022 and remain below the ECB’s inflation target over the medium term.

Medium-term outlook and scarring

• Medium-term output losses relative to pre-crisis trends will vary significantly across countries and sectors.
• The extent of labor market scarring will vary significantly across countries and sectors.

Uncertainty and structural legacies

• Uncertainty surrounding the outlook remains high and is largely related to pandemic dynamics and legacies, including induced behavioral and preference changes.

Subjects and keywords (as listed)

• Subjects: COVID-19; Environment; Fiscal policy; Fiscal stance; Greenhouse gas emissions; Health; Inflation; International organization; Labor; Labor markets; Monetary policy; Prices
• Keywords: aggregate REER gap; area policy rule; CA surplus; COVID-19; EU policy; Euro Area economy; Euro area GDP growth; Europe; Fiscal stance; Global; Greenhouse gas emissions; Inflation; Labor markets

Content in this bundle

• The Impact of the ECB’s Targeted Longer-term Refinancing Operations on Bank Lending
  • The Impact of the ECB’s Targeted Longer-term Refinancing Operations on Bank Lending (Markdown version)
  • The Impact of the ECB’s Targeted Longer-term Refinancing Operations on Bank Lending (PDF)