{
  "title": "IMF Executive Board Concludes 2024 Consultation with Euro Area",
  "publication": "IMF News, July 30, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation",
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  "summary": "The Executive Board of the International Monetary Fund (IMF) concluded the 2024 discussions on common euro area policies with member countries",
  "publishDate": "2024-07-30",
  "sections": [
    {
      "heading": "Macro Outlook and Recent Developments",
      "content": "- The euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025.\n- Drivers of near-term demand:\n  - Increasing real wages.\n  - Some drawdown of household savings contributing to consumption.\n  - Projected easing of financing conditions supporting a recovery in investment.\n- Inflation dynamics:\n  - Inflation is coming down as past monetary tightening and the decline in commodity prices are having an effect.\n  - Disinflation will continue to be gradual.\n  - Inflation is projected to return to target in the second half of 2025."
    },
    {
      "heading": "Risks",
      "content": "- Growth risks: predominantly on the downside.\n  - Past monetary policy tightening could put a stronger drag on output than expected.\n  - Adverse external developments—such as intensifying geopolitical tensions and/or weaker global demand—could hold back growth.\n  - Weakening labor markets could cause projected consumption growth not to materialize.\n- Inflation risks: two‑sided.\n  - Downside: weaker demand or labor markets could drag inflation below the baseline.\n  - Upside: stronger‑than‑expected wage pressures, continued high company profit margins, renewed commodity price spikes, or shipping disruptions could put upward pressure on inflation."
    },
    {
      "heading": "Executive Board Assessment",
      "content": "- Directors agreed with the thrust of the staff appraisal and welcomed the euro area’s resilience with inflation declining toward its target.\n- Growth outlook: Directors concurred with the positive growth outlook while recognizing downside risks.\n- Near‑term priorities emphasized by Directors:\n  - Finalizing the task of returning inflation to target.\n  - Ensuring credible fiscal consolidation, particularly in high‑debt countries.\n- Structural challenges noted:\n  - Population aging, the green transition, and security needs.\n  - Importance of labor market reforms and boosting investment and innovation to generate productivity growth.\n- Monetary policy:\n  - Commended the European Central Bank for skillful management.\n  - Welcomed the recent start to monetary policy easing.\n  - Stressed that the pace of further easing should be data dependent.\n  - Underscored importance of maintaining anchored inflation expectations and avoiding an overly restrictive policy stance.\n- Fiscal policy:\n  - Need to rebuild fiscal buffers to guard against future shocks and higher spending needs, while minimizing adverse effects on growth.\n  - Sustained fiscal adjustment in high‑debt and high‑deficit countries to restore fiscal sustainability and reduce risks to the euro area.\n  - Medium‑term fiscal adjustment should primarily rely on expenditure measures that protect priority spending.\n  - Countries with lower risk of debt becoming unsustainable could use fiscal space to enhance growth and resilience.\n- EU economic governance:\n  - Welcomed the new EU economic governance framework for enhancing fiscal policy coordination and fiscal sustainability via growth‑enhancing reforms and investments.\n  - Noted the framework’s complexity and the need for capacity and political support for effective implementation.\n  - Timely preparation of the medium‑term fiscal structural plans mandated under the framework is important.\n- Financial sector and macroprudential policy:\n  - Noted strong capital and liquidity positions of European banks.\n  - Saw merit in using temporarily high profits to build safeguards, including by increasing countercyclical buffer requirements.\n  - Continued monitoring of pockets of vulnerabilities from the commercial real estate sector and nonbank financial sector is important.\n  - Encouraged development of nonbank macroprudential tools and efforts to bridge data gaps.\n- Productivity, labor supply, and integration:\n  - Welcomed authorities’ efforts to boost productivity and labor supply.\n  - Recommended policies to address skills mismatches and improve labor mobility across the Union, including better integration of migrants into the labor market.\n  - Deeper financial market integration, including completing the capital markets and the banking unions, is essential to increase productivity and mobilize investment for the green and digital transformations.\n  - Underscored need for higher and better targeted EU public investment and lower barriers within the European Union to strengthen the single market.\n  - Establishing a common Climate and Energy Security Facility would also be important.\n- Trade and international engagement:\n  - Welcomed the European Union’s efforts to strengthen the rules‑based international system.\n  - Agreed on the need to continue to engage with partners as the EU implements trade‑related environment and climate policies.\n  - Agreed on the need to avoid distortive trade and industrial policies.\n- Next steps:\n  - The next consultation on euro area policies in the context of the Article IV obligations is expected to be held on the standard 12‑month cycle."
    },
    {
      "heading": "Key Statistics (Table 1: Euro Area: Main Economic Indicators, 2020–2029)",
      "content": "- Projection note: Projections for 2024-29 are based on the aggregation of the latest projections by IMF country teams, unless otherwise indicated.\n- Demand and Supply (y/y percent change, unless otherwise specified)\n  - Real GDP:\n    - 2020: -6.1\n    - 2021: 5.9\n    - 2022: 3.4\n    - 2023: 0.5\n    - 2024: 0.9\n    - 2025: 1.5\n    - 2026: 1.3\n    - 2027: 1.2\n  - Private consumption:\n    - 2020: -7.7\n    - 2021: 4.4\n    - 2022: 4.2\n    - 2023: 1.7\n    - 2024: 1.4\n  - Public consumption:\n    - 2020: 1.1\n    - 2021: 1.6\n    - 2022: 0.6\n    - 2023: 0.7\n    - 2024: 0.8\n  - Gross fixed investment:\n    - 2020: -5.9\n    - 2021: 3.5\n    - 2022: 2.5\n    - 2023: -0.2\n    - 2024: 2.0\n  - Final domestic demand:\n    - 2020: -5.4\n    - 2021: 4.1\n    - 2022: 3.2\n    - 2023: (not listed)\n  - Stockbuilding (contribution to growth) 2/:\n    - 2020: -0.3\n    - 2021: 0.4\n    - 2022: -0.6\n    - 2023: -0.1\n    - 2024: 0.0\n  - Domestic demand:\n    - 2020: -5.7\n    - 2021: 4.7\n    - 2022: 3.6\n    - 2023: 0.2\n  - Foreign balance 2/:\n    - 2020: 0.3\n    - 2021: 0.1\n  - Exports 3/:\n    - 2020: -9.1\n    - 2021: 11.5\n    - 2022: 7.2\n    - 2023: -0.8\n    - 2024: 2.8\n    - 2025: 3.0\n    - 2026: 2.9\n  - Imports 3/:\n    - 2020: -8.5\n    - 2021: 9.2\n    - 2022: 7.9\n    - 2023: -1.4\n    - 2024: 3.1\n- Resource Utilization\n  - Potential GDP:\n    - 2020: (not listed)\n  - Output gap 4/:\n    - 2020: -4.6\n    - 2021: -1.7\n    - 2022: -0.4\n  - Employment growth:\n    - 2020: 2.3\n  - Unemployment rate 5/:\n    - 2020: 8.0\n    - 2021: 7.8\n    - 2022: 6.8\n    - 2023: 6.6\n    - 2024: 6.5\n    - 2025: 6.4\n- Prices\n  - GDP deflator:\n    - 2020: 1.8\n    - 2021: 2.2\n    - 2022: 6.0\n    - 2023: 1.9\n  - Consumer prices:\n    - 2020: 2.6\n    - 2021: 8.4\n    - 2022: 5.4\n    - 2023: 2.4\n    - 2024: 2.1\n- Public Finance (percent of GDP)\n  - Overall fiscal balance:\n    - 2020: -7.0\n    - 2021: -5.2\n    - 2022: -3.7\n    - 2023: -3.5\n    - 2024: -3.0\n    - 2025: -2.8\n    - 2026: -2.6\n    - 2027: -2.5\n    - 2028: -2.4\n  - Primary balance:\n    - 2020: -3.9\n    - 2021: -2.1\n    - 2022: -1.3\n    - 2023: -1.0\n    - 2024: -0.7\n    - 2025: -0.5\n  - Structural balance 4/:\n    - 2020: -4.0\n    - 2021: -3.4\n    - 2022: -2.7\n  - Structural primary balance 4/:\n    - 2020: -2.0\n    - 2021: -1.9\n    - 2022: -1.1\n  - Gross public debt:\n    - 2020: 97.2\n    - 2021: 94.8\n    - 2022: 90.8\n    - 2023: 88.6\n    - 2024: 88.3\n    - 2025: 88.1\n    - 2026: 87.9\n    - 2027: 87.7\n- External Sector (percent of GDP) 6/\n  - Current account balance:\n    - 2020: 2.7\n- Interest Rates (percent, end of period) 7/\n  - Euro short-term rate (€STR):\n    - 2020: 3.9\n  - 10-year government benchmark bond yield:\n    - 2020: (not listed)\n- Exchange Rates (end of period) 7/\n  - U.S. dollar per euro:\n    - 2020: (not listed)\n  - Nominal effective rate (2005=100):\n    - 2020: 101.3\n    - 2021: 96.5\n    - 2022: 96.2\n    - 2023: 97.7\n    - 2024: 98.4\n  - Real effective rate (2005=100, ULC based):\n    - 2020: 90.7\n    - 2021: 86.3\n    - 2022: 84.3\n    - 2023: 85.4\n\nIMF Executive Board press release: IMF Executive Board Concludes 2024 Consultation with Euro Area.\n\n---\n\n\n References\n\n- IMF Policy Advice -- A Factsheet\n- Press Releases\n- PRESS CENTER\n- http://www.IMF.org/external/np/sec/misc/qualifiers.htm\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation"
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    "Published: July 30, 2024",
    "The euro area is recovering gradually, with a modest acceleration of growth projected for 2024, gathering further speed in 2025.",
    "Drivers of near-term demand:",
    "Inflation dynamics:",
    "Growth risks: predominantly on the downside.",
    "Inflation risks: two‑sided.",
    "Directors agreed with the thrust of the staff appraisal and welcomed the euro area’s resilience with inflation declining toward its target.",
    "Growth outlook: Directors concurred with the positive growth outlook while recognizing downside risks.",
    "Near‑term priorities emphasized by Directors:",
    "Structural challenges noted:",
    "Monetary policy:",
    "Fiscal policy:",
    "EU economic governance:",
    "Financial sector and macroprudential policy:",
    "Productivity, labor supply, and integration:",
    "Trade and international engagement:",
    "Next steps:",
    "Projection note: Projections for 2024-29 are based on the aggregation of the latest projections by IMF country teams, unless otherwise indicated.",
    "Demand and Supply (y/y percent change, unless otherwise specified)",
    "Resource Utilization",
    "Prices",
    "Public Finance (percent of GDP)",
    "External Sector (percent of GDP) 6/",
    "Interest Rates (percent, end of period) 7/",
    "Exchange Rates (end of period) 7/",
    "[IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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