{
  "title": "Press Release: IMF Says European Economic Recovery to be Fragile and Calls for Policy Action to Secure a Solid Rebound",
  "publication": "IMF News, October 3, 2009",
  "sourceUrl": "https://www.imf.org/en/news/articles/2015/09/14/01/49/pr09332",
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  "summary": "The European economic recession is showing signs of bottoming out, with the contraction appearing to have ended at mid-2009 and expected to give way to a moderate recovery in 2010 and more solid growth returning only afterwards.",
  "publishDate": "2009-10-03",
  "sections": [
    {
      "heading": "Main findings on the European outlook",
      "content": "- The European economic recession is showing signs of bottoming out, with the contraction appearing to have ended at mid-2009 and expected to give way to a moderate recovery in 2010 and more solid growth returning only afterwards.\n- In advanced economies the IMF projects an average decline of -4.0 percent in 2009 and growth of 0.5 percent in 2010.\n- In emerging Europe activity is expected to contract by -6.6 percent in 2009, with growth returning in 2010 and GDP increasing by an average 1.7 percent.\n- Recovery drivers are weak: the pickup in demand from Asia can hardly substitute for the pre-crisis appetite for imports of U.S. consumers; exports alone cannot be relied on to drive the recovery.\n- Key constraints include scarce credit, rising unemployment, and a reduced growth potential caused by the crisis."
    },
    {
      "heading": "Near-term financial sector actions urged",
      "content": "- Adopt a more resolute approach to assessing balance sheet risks faced by banks.\n- Take action to recapitalize or restructure viable institutions and resolve others.\n- The IMF warns: “The economic recovery might be weaker than hoped for unless the financial sector problems are dealt with promptly and effectively.”"
    },
    {
      "heading": "Macroeconomic policy guidance",
      "content": "- Fiscal policy:\n  - Continue with planned stimuli in the near term and let automatic stabilizers work.\n  - Once the recovery has firmed up, undertake a strong consolidation effort to address sustainability concerns.\n- Monetary policy:\n  - Remain supportive while financial conditions are fragile.\n  - Once financial conditions normalize and the recovery is firm, prepare to exit unprecedented market interventions.\n  - Clear communication of the exit strategy will be essential.\n- The IMF emphasizes careful timing and pace for exits: “Getting its timing and the pace right will require careful judgment.”"
    },
    {
      "heading": "Structural and long-term priorities",
      "content": "- Repair the damage to potential growth is identified as the ultimate priority: “Only lifting the long-run growth potential of Europe will put the crisis behind us for good.”\n- Advanced countries: pursue opportunities to reform labor and product markets.\n- Emerging economies: develop a new business model that rebalances the sources of growth and financing."
    },
    {
      "heading": "Brief summary of analytic chapters in the 2009 October REO",
      "content": "- Chapter 2, “The Crisis and Potential Output”:\n  - Financial sector difficulties, weak investment, and long spells of unemployment are likely to hold back potential growth over the next few years; magnitude is uncertain.\n  - Over the long term, potential growth should return to historic trends in most advanced economies, except where unsustainable financial sector profits might have exaggerated prior growth.\n  - Emerging Europe: resuming convergence depends on restoring sustainable capital inflows by ensuring a business-friendly environment, strengthening policy frameworks to reduce uncertainty, and implementing sound macroeconomic policies.\n- Chapter 3, “Implications of the Fall in Potential Output for Macroeconomic Policies”:\n  - The decline in potential output and uncertainty complicates fiscal and monetary policy decisions and can lead to policy mistakes.\n  - Monetary policymakers need to clearly communicate their views on potential output underpinning policy rate decisions and emphasize willingness to adjust as new information arrives.\n  - Given large fiscal costs of the crisis, fiscal policy should err on the side of caution and consolidate as soon as the recovery takes momentum.\n- Chapter 4, “Policies in Emerging Economies to Cope with Heightened Risk during Recovery”:\n  - Emerging Europe is likely to face higher risk premiums and a more volatile environment; investors will pay increased attention to domestic policies.\n  - Policies that lower uncertainty about the state of the financial system and reduce fiscal discretion will address concerns and yield a “double dividend” for long-term growth prospects."
    },
    {
      "heading": "Key statistics (selected from Table 1: Real GDP Growth and CPI Inflation, 2006–10)",
      "content": "- Europe (1/ 2/):\n  - Real GDP Growth: 2006: 4.2, 2007: 3.9, 2008: 1.7, 2009: -4.7, 2010: 0.8\n  - CPI Inflation: 2006: 3.6, 2007: 5.7, 2008: 3.0, 2009: 2.7\n- Advanced European economies (1/):\n  - Real GDP Growth: 2006: 3.2, 2007: 2.8, 2008: -4.0, 2009: 0.5\n  - CPI Inflation: 2006: 2.2, 2007: 2.1, 2008: 3.4, 2009: 0.7, 2010: 1.0\n- Emerging European economies (1/ 2/):\n  - Real GDP Growth: 2006: 7.2, 2007: 6.8, 2008: -6.6, 2009: 7.8, 2010: 12.0\n  - CPI Inflation: 2006: 9.0, 2007: 7.8, 2008: 12.0, 2009: 9.0\n- European Union (1/):\n  - Real GDP Growth: 2006: 3.1, 2007: -4.2, 2008: 2.3, 2009: 2.4, 2010: 3.7\n  - CPI Inflation: 2006: 0.9, 2007: 1.1\n- Selected country figures (Real GDP Growth and/or CPI Inflation where specified):\n  - Ireland: 2006: 5.4, 2007: 6.0, 2008: -3.0, 2009: -7.5, 2010: -2.5 (and additional entries: -1.6, -0.3)\n  - Luxembourg: 2006: 6.4, 2007: 5.2, 2008: -4.8, 2009: -0.2\n  - Slovak Republic: 2006: 8.5, 2007: 10.4, 2008: 4.6, 2009: 1.5\n  - Slovenia: 2006: 5.9, 2007: 0.6\n  - Estonia: 2006: 10.0, 2007: -3.6, 2008: -14.0, 2009: -2.6\n  - Latvia: 2006: 12.2, 2007: -4.6, 2008: -18.0, 2009: 10.1, 2010: 15.3, additional: -3.5\n  - Lithuania: 2006: 8.9, 2007: -18.5, 2008: 5.8, 2009: 11.1, additional: -2.9\n  - Romania: 2006: 7.1, 2007: -8.5, 2008: 4.8, 2009: 5.5\n  - Russia: 2006: 8.1, 2007: 9.7, 2008: 14.1, 2009: 12.3, 2010: 9.9\n  - Ukraine: 2006: 9.1, 2007: 12.8, 2008: 25.2, 2009: 16.3, 2010: 10.3\n- Source noted in table: IMF, World Economic Outlook.\n- Footnotes in table:\n  - 1/ Average weighted by PPP GDP.\n  - 2/ Montenegro is excluded from the aggregate calculations.\n\nPress Release No.09/332, October 3, 2009 — International Monetary Fund\n\n---\n\n Content in this bundle\n\n- Pr09332rpdf (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\n References\n\n- Press Releases\n- Read the report\n- PRESS CENTER\n- 2009 October REO\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2015/09/14/01/49/pr09332"
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    "Published: October 3, 2009",
    "The European economic recession is showing signs of bottoming out, with the contraction appearing to have ended at mid-2009 and expected to give way to a moderate recovery in 2010 and more solid growth returning only afterwards.",
    "In advanced economies the IMF projects an average decline of -4.0 percent in 2009 and growth of 0.5 percent in 2010.",
    "In emerging Europe activity is expected to contract by -6.6 percent in 2009, with growth returning in 2010 and GDP increasing by an average 1.7 percent.",
    "Recovery drivers are weak: the pickup in demand from Asia can hardly substitute for the pre-crisis appetite for imports of U.S. consumers; exports alone cannot be relied on to drive the recovery.",
    "Key constraints include scarce credit, rising unemployment, and a reduced growth potential caused by the crisis.",
    "Adopt a more resolute approach to assessing balance sheet risks faced by banks.",
    "Take action to recapitalize or restructure viable institutions and resolve others.",
    "The IMF warns: “The economic recovery might be weaker than hoped for unless the financial sector problems are dealt with promptly and effectively.”",
    "Fiscal policy:",
    "Monetary policy:",
    "The IMF emphasizes careful timing and pace for exits: “Getting its timing and the pace right will require careful judgment.”",
    "Repair the damage to potential growth is identified as the ultimate priority: “Only lifting the long-run growth potential of Europe will put the crisis behind us for good.”",
    "Advanced countries: pursue opportunities to reform labor and product markets.",
    "Emerging economies: develop a new business model that rebalances the sources of growth and financing.",
    "Chapter 2, “The Crisis and Potential Output”:",
    "Chapter 3, “Implications of the Fall in Potential Output for Macroeconomic Policies”:",
    "Chapter 4, “Policies in Emerging Economies to Cope with Heightened Risk during Recovery”:",
    "Europe (1/ 2/):",
    "Advanced European economies (1/):",
    "Emerging European economies (1/ 2/):",
    "European Union (1/):",
    "Selected country figures (Real GDP Growth and/or CPI Inflation where specified):",
    "Source noted in table: IMF, World Economic Outlook.",
    "Footnotes in table:",
    "[Pr09332rpdf (PDF)](/-/media/websites/imf/imported/external/russian/np/sec/pr/2009/pr09332rpdf.pdf){rel=\"external\" type=\"application/pdf\"}",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[Read the report](https://www.imf.org/external/pubs/ft/reo/2009/EUR/eng/ereo1009.htm)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[2009 October REO](https://www.imf.org/external/pubs/ft/reo/2009/eur/eng/sreo1009.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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