## IMF Executive Board Concludes 2024 Consultation with Euro Area

_IMF News, July 30, 2024_

## Source details

**Canonical URL:** [IMF Executive Board Concludes 2024 Consultation with Euro Area](https://www.imf.org/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation)

## Other formats

- [Markdown version](/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation/index.md)
- [Structured JSON version](/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation/index.json)
- [Bundle manifest](/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation/bundle-manifest.json)

## Bibliographic details
- Published: July 30, 2024

---

### Macro Outlook and Recent Developments
- 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:
  - Increasing real wages.
  - Some drawdown of household savings contributing to consumption.
  - Projected easing of financing conditions supporting a recovery in investment.
- Inflation dynamics:
  - Inflation is coming down as past monetary tightening and the decline in commodity prices are having an effect.
  - Disinflation will continue to be gradual.
  - Inflation is projected to return to target in the second half of 2025.

### Risks
- Growth risks: predominantly on the downside.
  - Past monetary policy tightening could put a stronger drag on output than expected.
  - Adverse external developments—such as intensifying geopolitical tensions and/or weaker global demand—could hold back growth.
  - Weakening labor markets could cause projected consumption growth not to materialize.
- Inflation risks: two‑sided.
  - Downside: weaker demand or labor markets could drag inflation below the baseline.
  - Upside: stronger‑than‑expected wage pressures, continued high company profit margins, renewed commodity price spikes, or shipping disruptions could put upward pressure on inflation.

### Executive Board Assessment
- 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:
  - Finalizing the task of returning inflation to target.
  - Ensuring credible fiscal consolidation, particularly in high‑debt countries.
- Structural challenges noted:
  - Population aging, the green transition, and security needs.
  - Importance of labor market reforms and boosting investment and innovation to generate productivity growth.
- Monetary policy:
  - Commended the European Central Bank for skillful management.
  - Welcomed the recent start to monetary policy easing.
  - Stressed that the pace of further easing should be data dependent.
  - Underscored importance of maintaining anchored inflation expectations and avoiding an overly restrictive policy stance.
- Fiscal policy:
  - Need to rebuild fiscal buffers to guard against future shocks and higher spending needs, while minimizing adverse effects on growth.
  - Sustained fiscal adjustment in high‑debt and high‑deficit countries to restore fiscal sustainability and reduce risks to the euro area.
  - Medium‑term fiscal adjustment should primarily rely on expenditure measures that protect priority spending.
  - Countries with lower risk of debt becoming unsustainable could use fiscal space to enhance growth and resilience.
- EU economic governance:
  - Welcomed the new EU economic governance framework for enhancing fiscal policy coordination and fiscal sustainability via growth‑enhancing reforms and investments.
  - Noted the framework’s complexity and the need for capacity and political support for effective implementation.
  - Timely preparation of the medium‑term fiscal structural plans mandated under the framework is important.
- Financial sector and macroprudential policy:
  - Noted strong capital and liquidity positions of European banks.
  - Saw merit in using temporarily high profits to build safeguards, including by increasing countercyclical buffer requirements.
  - Continued monitoring of pockets of vulnerabilities from the commercial real estate sector and nonbank financial sector is important.
  - Encouraged development of nonbank macroprudential tools and efforts to bridge data gaps.
- Productivity, labor supply, and integration:
  - Welcomed authorities’ efforts to boost productivity and labor supply.
  - Recommended policies to address skills mismatches and improve labor mobility across the Union, including better integration of migrants into the labor market.
  - 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.
  - Underscored need for higher and better targeted EU public investment and lower barriers within the European Union to strengthen the single market.
  - Establishing a common Climate and Energy Security Facility would also be important.
- Trade and international engagement:
  - Welcomed the European Union’s efforts to strengthen the rules‑based international system.
  - Agreed on the need to continue to engage with partners as the EU implements trade‑related environment and climate policies.
  - Agreed on the need to avoid distortive trade and industrial policies.
- Next steps:
  - 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.

### Key Statistics (Table 1: Euro Area: Main Economic Indicators, 2020–2029)
- 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)
  - Real GDP:
    - 2020: -6.1
    - 2021: 5.9
    - 2022: 3.4
    - 2023: 0.5
    - 2024: 0.9
    - 2025: 1.5
    - 2026: 1.3
    - 2027: 1.2
  - Private consumption:
    - 2020: -7.7
    - 2021: 4.4
    - 2022: 4.2
    - 2023: 1.7
    - 2024: 1.4
  - Public consumption:
    - 2020: 1.1
    - 2021: 1.6
    - 2022: 0.6
    - 2023: 0.7
    - 2024: 0.8
  - Gross fixed investment:
    - 2020: -5.9
    - 2021: 3.5
    - 2022: 2.5
    - 2023: -0.2
    - 2024: 2.0
  - Final domestic demand:
    - 2020: -5.4
    - 2021: 4.1
    - 2022: 3.2
    - 2023: (not listed)
  - Stockbuilding (contribution to growth) 2/:
    - 2020: -0.3
    - 2021: 0.4
    - 2022: -0.6
    - 2023: -0.1
    - 2024: 0.0
  - Domestic demand:
    - 2020: -5.7
    - 2021: 4.7
    - 2022: 3.6
    - 2023: 0.2
  - Foreign balance 2/:
    - 2020: 0.3
    - 2021: 0.1
  - Exports 3/:
    - 2020: -9.1
    - 2021: 11.5
    - 2022: 7.2
    - 2023: -0.8
    - 2024: 2.8
    - 2025: 3.0
    - 2026: 2.9
  - Imports 3/:
    - 2020: -8.5
    - 2021: 9.2
    - 2022: 7.9
    - 2023: -1.4
    - 2024: 3.1
- Resource Utilization
  - Potential GDP:
    - 2020: (not listed)
  - Output gap 4/:
    - 2020: -4.6
    - 2021: -1.7
    - 2022: -0.4
  - Employment growth:
    - 2020: 2.3
  - Unemployment rate 5/:
    - 2020: 8.0
    - 2021: 7.8
    - 2022: 6.8
    - 2023: 6.6
    - 2024: 6.5
    - 2025: 6.4
- Prices
  - GDP deflator:
    - 2020: 1.8
    - 2021: 2.2
    - 2022: 6.0
    - 2023: 1.9
  - Consumer prices:
    - 2020: 2.6
    - 2021: 8.4
    - 2022: 5.4
    - 2023: 2.4
    - 2024: 2.1
- Public Finance (percent of GDP)
  - Overall fiscal balance:
    - 2020: -7.0
    - 2021: -5.2
    - 2022: -3.7
    - 2023: -3.5
    - 2024: -3.0
    - 2025: -2.8
    - 2026: -2.6
    - 2027: -2.5
    - 2028: -2.4
  - Primary balance:
    - 2020: -3.9
    - 2021: -2.1
    - 2022: -1.3
    - 2023: -1.0
    - 2024: -0.7
    - 2025: -0.5
  - Structural balance 4/:
    - 2020: -4.0
    - 2021: -3.4
    - 2022: -2.7
  - Structural primary balance 4/:
    - 2020: -2.0
    - 2021: -1.9
    - 2022: -1.1
  - Gross public debt:
    - 2020: 97.2
    - 2021: 94.8
    - 2022: 90.8
    - 2023: 88.6
    - 2024: 88.3
    - 2025: 88.1
    - 2026: 87.9
    - 2027: 87.7
- External Sector (percent of GDP) 6/
  - Current account balance:
    - 2020: 2.7
- Interest Rates (percent, end of period) 7/
  - Euro short-term rate (€STR):
    - 2020: 3.9
  - 10-year government benchmark bond yield:
    - 2020: (not listed)
- Exchange Rates (end of period) 7/
  - U.S. dollar per euro:
    - 2020: (not listed)
  - Nominal effective rate (2005=100):
    - 2020: 101.3
    - 2021: 96.5
    - 2022: 96.2
    - 2023: 97.7
    - 2024: 98.4
  - Real effective rate (2005=100, ULC based):
    - 2020: 90.7
    - 2021: 86.3
    - 2022: 84.3
    - 2023: 85.4

*IMF Executive Board press release: IMF Executive Board Concludes 2024 Consultation with Euro Area.*

---


## References

- [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)

_Source: https://www.imf.org/en/news/articles/2024/07/29/pr-24292-euro-area-imf-executive-board-concludes-2024-consultation_