{ "title": "Transcript of October 2021 European Press Briefing", "publication": "IMF News, October 20, 2021", "sourceUrl": "https://www.imf.org/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing", "canonical": "https://www.imf.org/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing", "overlayPath": "/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/index.md", "summary": "Advanced European economies are set to expand by 5.2 percent in 2021, 0.3 percentage points of GDP higher than expected in the July update.", "publishDate": "2021-10-20", "sections": [ { "heading": "Regional growth and outlook", "content": "- Advanced European economies are set to expand by 5.2 percent in 2021, 0.3 percentage points of GDP higher than expected in the July update.\n- Emerging market economies will hit 6 percent in 2021 — an upgrade of 1.1 percentage points.\n- Recovery described as \"increasingly, resilient\" but \"bumpy\" and clouded by uncertainty due to COVID-19, supply-chain disruptions, high energy prices, shortages of some durable goods, and rising prices.\n- Employment has yet to reach pre-crisis levels; hours worked are still 3 percent less than before the crisis." }, { "heading": "Inflation and monetary policy", "content": "- Main recent drivers of consumer price increases: energy prices (including oil) and supply-chain disruptions with elevated transport costs.\n- Expectation that these factors will subside in the course of 2022.\n- For inflation to become persistent, an acceleration in wage inflation would be required — not currently in the IMF baseline for advanced Europe.\n- IMF view for monetary policy:\n - In most advanced economies: monetary policy should remain highly accommodative because labor market slack remains and broad-based inflationary pressures are limited; premature tightening would hurt the recovery.\n - In several emerging European economies: inflation expectations are rising; a gradual scaling back of monetary accommodation is warranted — phase out asset purchases and signal or initiate normalization of rates.\n- Medium-term underlying inflation projection for the Euro area: 1.8 percent.\n- Observation: natural gas prices increased five times over the last year; these spikes expected to fade by the second quarter of 2022." }, { "heading": "Fiscal policy: withdrawal, rules, and sequencing", "content": "- IMF projects a major reduction in fiscal deficits in 2022:\n - For advanced economies: fiscal deficit will decrease by four percentage points.\n - For emerging European economies: fiscal deficit will decrease by one percentage point.\n- Fiscal withdrawal should be carefully orchestrated and calibrated to the strength of the recovery; pace should guard against undercutting recovery momentum.\n- Risks from premature fiscal tightening: if recovery stalls while fiscal policy is scaled back, monetary policy would have limited ammunition in many advanced European economies.\n- Fiscal policy should shift from emergency support to:\n - Retargeted support to specific sectors.\n - Temporary investment incentives and hiring subsidies to enhance workforce skills and bring people back to jobs.\n - Adapted social safety nets and labor market institutions to address automation and distributional effects.\n- On EU fiscal rules: IMF advocates reform to make rules simpler, easier to monitor, enforce, and communicate, and to support consolidation trajectories from 2023 onward, especially in high-debt countries.\n- Medium-term fiscal consolidation: authorities should communicate clear medium-term plans early to provide certainty about consolidation paths." }, { "heading": "Labor reallocation, automation, and structural policies", "content": "- Anticipated labor reallocation from low-skilled, shrinking sectors to expanding, higher-skill sectors:\n - Baseline expects about 1.5 percent of the labor force in the lowest-skilled sector will be set free.\n - Baseline expects a need for additional labor in high-skill sectors of about 1 percent of employment.\n- Automation is expected to accelerate and add to labor market pressures.\n- Policy priorities to manage transition:\n - Active labor market policies, retraining, and upskilling programs.\n - Temporary incentives and hiring subsidies.\n - Investments in green and digital infrastructure to support sectoral shifts." }, { "heading": "Supply-chain disruptions and policy responses", "content": "- Disruptions are pandemic-driven: supply reductions combined with a strong demand rebound created mismatches and bottlenecks.\n- Market forces will resolve many demand-shift adjustments, but policy can address bottlenecks, especially in transportation and infrastructure.\n- Recommended public actions:\n - Invest in infrastructure to strengthen and diversify supply chains (resilience, not on-shoring).\n - Support green and digital transitions to facilitate medium-term adjustments." }, { "heading": "Energy prices and the green transition", "content": "- Energy has been the biggest driver of recent consumer price increases; oil prices have returned to pre-COVID ranges due to strong demand.\n- Spain example: dynamic pricing amplified transmission of gas price shocks to retail electricity; temporary measures used to protect vulnerable populations amid what IMF sees as temporary price spikes expected to fade in Q2 2022.\n- Broader policy implications:\n - Invest in energy storage and production.\n - Coordinate policies for the green transition to avoid transition bottlenecks." }, { "heading": "Country-specific assessments and recommendations", "content": "- United Kingdom:\n - UK has been tuning fiscal stance through the crisis; IMF welcomes proposed progressive taxation and a clear medium-term fiscal consolidation plan to provide certainty.\n- Russia:\n - Russia experienced a relatively shallow recession in 2020 and rebounded strongly in 2021; fiscal and monetary settings were supportive. IMF emphasizes need for structural reforms to raise productivity and growth.\n- Spain:\n - Measures to limit electricity tariffs seen as protecting the vulnerable during temporary price spikes; longer-term focus needed on energy storage/production and the green transition.\n- Portugal:\n - IMF forecast differs slightly from Portugal's official projections; Portugal is rebounding strongly in H2 2021 into 2022.\n - Tourism hit hard; Next Generation EU Fund and structural reforms expected to support medium-term growth and productivity if implemented.\n- Ukraine:\n - Responded well to crisis with fiscal support and accommodative monetary policy; inflation has picked up (partly from minimum wage hike). IMF supports the central bank's tightening to anchor expectations and contain second-round effects.\n- Greece:\n - Debt rose during the pandemic; fiscal consolidation in the medium term is needed.\n - Next Generation EU Fund and implementation of structural reforms are key to strengthening growth and debt sustainability.\n- Western Balkans:\n - Hit hard by the crisis; benefited from easing financial conditions, fiscal support, and IMF emergency support and SDR reallocations.\n - Major downside risk: low vaccination rates (about 30 percent) that expose the region to future infection waves and economic setbacks; policy focus on communication to address vaccine hesitancy is important.\n- France:\n - France implemented a strong fiscal response and has a supportive fiscal stance for next year while pivoting to more targeted support. IMF notes the importance of medium-term consolidation to rebuild fiscal buffers." }, { "heading": "Risks, scenarios, and vigilance", "content": "- Key near-term risks: COVID-19 resurgence, persistent supply-chain bottlenecks, sustained energy-price shocks, low vaccination in some regions.\n- IMF does not expect an inflationary spiral in Europe at this stage; main drivers are energy and temporary supply-side factors expected to fade in 2022.\n- Emerging European economies face higher risk of second-round effects due to tighter labor markets and rising inflation expectations; central banks in those countries are already tightening or signaling tightening.\n- Policy recommendation summary:\n - Maintain accommodative monetary policy in advanced economies while monitoring wage pressures.\n - Gradually normalize monetary policy in emerging European economies where inflation and expectations are rising.\n - Orchestrate fiscal withdrawal carefully; pivot support toward reallocation, investment, and social protection; communicate medium-term consolidation plans early.\n - Invest in green and digital infrastructure and in strengthening supply-chain resilience.\n - Implement active labor market policies and retraining to manage labor reallocation and automation impacts.\n\nTranscript of October 2021 European Press Briefing — IMF Communications Department\n\n---\n\n\n References\n\n- France and the IMF\n- Greece and the IMF\n- Portugal and the IMF\n- Russian Federation and the IMF\n- Spain and the IMF\n- Transcripts\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing" } ], "bullets": [ "[Markdown version](/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/index.md)", "[Structured JSON version](/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/index.json)", "[Bundle manifest](/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/bundle-manifest.json)", "Published: October 20, 2021", "Advanced European economies are set to expand by 5.2 percent in 2021, 0.3 percentage points of GDP higher than expected in the July update.", "Emerging market economies will hit 6 percent in 2021 — an upgrade of 1.1 percentage points.", "Recovery described as \"increasingly, resilient\" but \"bumpy\" and clouded by uncertainty due to COVID-19, supply-chain disruptions, high energy prices, shortages of some durable goods, and rising prices.", "Employment has yet to reach pre-crisis levels; hours worked are still 3 percent less than before the crisis.", "Main recent drivers of consumer price increases: energy prices (including oil) and supply-chain disruptions with elevated transport costs.", "Expectation that these factors will subside in the course of 2022.", "For inflation to become persistent, an acceleration in wage inflation would be required — not currently in the IMF baseline for advanced Europe.", "IMF view for monetary policy:", "Medium-term underlying inflation projection for the Euro area: 1.8 percent.", "Observation: natural gas prices increased five times over the last year; these spikes expected to fade by the second quarter of 2022.", "IMF projects a major reduction in fiscal deficits in 2022:", "Fiscal withdrawal should be carefully orchestrated and calibrated to the strength of the recovery; pace should guard against undercutting recovery momentum.", "Risks from premature fiscal tightening: if recovery stalls while fiscal policy is scaled back, monetary policy would have limited ammunition in many advanced European economies.", "Fiscal policy should shift from emergency support to:", "On EU fiscal rules: IMF advocates reform to make rules simpler, easier to monitor, enforce, and communicate, and to support consolidation trajectories from 2023 onward, especially in high-debt countries.", "Medium-term fiscal consolidation: authorities should communicate clear medium-term plans early to provide certainty about consolidation paths.", "Anticipated labor reallocation from low-skilled, shrinking sectors to expanding, higher-skill sectors:", "Automation is expected to accelerate and add to labor market pressures.", "Policy priorities to manage transition:", "Disruptions are pandemic-driven: supply reductions combined with a strong demand rebound created mismatches and bottlenecks.", "Market forces will resolve many demand-shift adjustments, but policy can address bottlenecks, especially in transportation and infrastructure.", "Recommended public actions:", "Energy has been the biggest driver of recent consumer price increases; oil prices have returned to pre-COVID ranges due to strong demand.", "Spain example: dynamic pricing amplified transmission of gas price shocks to retail electricity; temporary measures used to protect vulnerable populations amid what IMF sees as temporary price spikes expected to fade in Q2 2022.", "Broader policy implications:", "United Kingdom:", "Russia:", "Spain:", "Portugal:", "Ukraine:", "Greece:", "Western Balkans:", "France:", "Key near-term risks: COVID-19 resurgence, persistent supply-chain bottlenecks, sustained energy-price shocks, low vaccination in some regions.", "IMF does not expect an inflationary spiral in Europe at this stage; main drivers are energy and temporary supply-side factors expected to fade in 2022.", "Emerging European economies face higher risk of second-round effects due to tighter labor markets and rising inflation expectations; central banks in those countries are already tightening or signaling tightening.", "Policy recommendation summary:", "[France and the IMF](http://www.imf.org/external/country/FRA/index.htm)", "[Greece and the IMF](http://www.imf.org/external/country/GRC/index.htm)", "[Portugal and the IMF](http://www.imf.org/external/country/PRT/index.htm)", "[Russian Federation and the IMF](http://www.imf.org/external/country/RUS/index.htm)", "[Spain and the IMF](http://www.imf.org/external/country/ESP/index.htm)", "[Transcripts](https://www.imf.org/en/news/searchnews)", "[PRESS CENTER](http://presscenter.imf.org/)", "[https://www.imf.org/en/home](https://www.imf.org/en/home)" ], "alternates": { "markdown": "/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/index.md", "json": "/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/index.json", "bundleManifest": "/en/news/articles/2021/10/25/tr102021-transcript-of-european-department-press-briefing/bundle-manifest.json" }, "generatedAtUtc": "2026-09-26T00:43:46.467Z" }