## Alfred Kammer’s Opening Remarks at the Press Conference for the Regional Economic Outlook for Europe

_IMF News, April 24, 2025_

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## Bibliographic details
- Authors: Alfred Kammer April
- Published: April 24, 2025

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### Forecast and near-term outlook
- Euro area growth forecast: 0.8 percent for 2025 and 1.2 percent for 2026.
- Size of downgrade relative to January 2025 forecast: -0.2 percentage points for both years.
- Drivers of weaker activity: increase in US tariffs, elevated uncertainty, tighter financial conditions.
- Impact of increased public spending on euro area growth: 0.1 and 0.2 percentage points of GDP in 2025 and 2026, respectively.
- US tariffs note: forecast includes all tariff announcements (US tariffs on the EU) up until April 4, 2025, at an estimated US effective rate of about 15 percent.

### CESEE region outlook
- CESEE growth forecast: 2.6 percent for 2025 and 3.0 percent for 2026.
- Downgrade attribution: comparatively larger trade-exposed manufacturing sector in the region.
- Regional inflation persistence: inflation rates likely to remain above targets well into 2026 and for some until 2027.
- Country-specific note: Romania, Hungary, and Poland — high wage growth may take time to come down and could slow disinflation.
- Definition: CESEE excludes Belarus, Russia, Türkiye and Ukraine.

### Risks to growth
- Downside risks: further deterioration of trade tensions and uncertainty; tighter financial conditions; possible strains despite generally resilient financial system.
- Upside risks: larger fiscal easing due to higher defense spending and lower energy prices, especially beyond 2025.
- Trade diversion preliminary estimate: higher imports from China of around 0.25 percent of EU GDP in the near term.
- Net effect caveat: net effects difficult to gauge; sector-specific safeguards should be time-limited, WTO-aligned, and well-communicated.

### Inflation and monetary policy
- Euro area inflation: forecast to reach target sustainably in the second half of 2025 slightly faster than previously anticipated due to lower energy prices and softer demand.
- CESEE inflation: likely to remain above targets well into 2026 and for some until 2027 because of persistent services inflation and high labor costs.
- Monetary policy recommendation: IMF recommends that the ECB lower the policy rate to 2 percent this summer and maintain it there, barring major shocks.
- CESEE monetary stance: central banks should ease cautiously where inflation is still higher and more persistent.
- Monetary policy guidance: central banks should continue to normalize monetary policy with caution; monetary policy must remain agile and focused on durably reaching targets.

### Medium-term structural challenges
- Demographics: by 2050 the working-age population will have shrunk in more than two-thirds of EU countries.
- Structural transformations: arrival of new technologies in automobile and AI sectors; sharp rise in energy costs.
- Productivity and investment: private investment and productivity growth have slowed; European firms have fallen behind the global productivity frontier (IMF October 2024).
- Single market fragmentation: Europe’s still very fragmented single market limits companies’ incentives and ability to innovate and scale up.
- Long-term spending pressures: over the next 25 years, social, defense, and climate spending alone will add almost 5 ¾ percentage points of GDP to budgets in advanced economies, and 8 percentage points in emerging Europe.

### Reform opportunities and projected gains
- EU-level reforms: selected, actionable EU-level reforms could increase EU GDP by around 3 percent over the next decade.
- Key EU reform areas: lowering barriers to labor mobility; enhancing the functioning of capital markets; creating a more integrated electricity market; harmonizing laws and regulations (such as through a 28th regime).
- National reform gains: comprehensive national reforms could raise real GDP levels by about 5 percent in advanced Europe and between 7 to 9 percent in the CESEE region.
- Priority national reforms: raising skills of workers; improving functioning of labor markets; for advanced economies, boosting innovation; for several CESEE countries, strengthening the rule of law and combatting corruption.
- Historical integration payoff: last enlargement wave in 2004 led new member states to increase their GDP per person by 30 percent after 15 years versus what it would have been without accession.

### Policy prescriptions (summary)
- Trade
  - Aim for more, not less trade; preserve openness and expand free trade agreements.
  - Support to viable businesses to mitigate tariff impacts should be temporary and targeted.
  - Carefully assess trade diversion; consider sector-specific safeguards only where viable firms are at risk and ensure measures align with WTO principles, are time-limited, and well-communicated.
- Macroeconomic stability
  - Ensure stability through balanced macroeconomic policies.
  - Rebuild fiscal buffers where needed; those with low deficits and debt can temporarily accommodate priority defense spending but should return to debt sustainability goals over time.
  - Countries with high debt levels should reallocate spending or boost fiscal revenues without delay.
- Structural reform and resilience
  - Embrace structural reform agenda at EU and national levels to unlock growth potential and increase resilience.
  - Focus areas include single market integration, labor mobility, capital market functioning, electricity market integration, harmonization of laws, worker skills, labor market functioning, innovation, rule of law, and anti-corruption measures.

*Alfred Kammer — Opening Remarks at the Press Conference for the Regional Economic Outlook for Europe, April 24, 2025 (IMF Communications Department).*

---

## Content in this bundle

- **IMF Staff Background Note on EU Energy Market Integration**
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  - [IMF Staff Background Note on EU Energy Market Integration (PDF)](/-/media/files/miscellaneous/background-notes/imf-background-note-on-eu-energy-market-integration-january-2025-to-publish.pdf){rel="external" type="application/pdf"}
- **reoeurnote1**
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  - [reoeurnote1 (PDF)](/-/media/files/publications/reo/eur/2024/october/english/reoeurnote1.pdf){rel="external" type="application/pdf"}
- **Box 2.2. Regional Convergence after EU Accession**
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- **Executive Summary**
  - [Executive Summary (Markdown version)](/-/media/files/publications/reo/eur/2024/october/english/text.pdf.md){rel="alternate" type="text/markdown"}
  - [Executive Summary (PDF)](/-/media/files/publications/reo/eur/2024/october/english/text.pdf){rel="external" type="application/pdf"}

---

## References

- [Alfred Kammer](https://www.imf.org/en/About/senior-officials/Bios/alfred-kammer)
- [Germany and the IMF](http://www.imf.org/external/country/DEU/index.htm)
- [Hungary and the IMF](http://www.imf.org/external/country/HUN/index.htm)
- [Republic of Belarus and the IMF](http://www.imf.org/external/country/BLR/index.htm)
- [Republic of Poland and the IMF](http://www.imf.org/external/country/POL/index.htm)
- [Republic of Türkiye and the IMF](http://www.imf.org/external/country/TUR/index.htm)
- [Romania and the IMF](http://www.imf.org/external/country/ROU/index.htm)
- [Speeches](https://www.imf.org/en/news/searchnews)
- [PRESS CENTER](http://presscenter.imf.org/)
- [Arnold, Claveres and Frie, 2024](https://www.imf.org/en/Publications/WP/Issues/2024/07/10/Stepping-Up-Venture-Capital-to-Finance-Innovation-in-Europe-551411)
- [Eble et al., 2025](https://www.imf.org/en/Publications/Departmental-Papers-Policy-Papers/Issues/2025/03/13/Long-Term-Spending-Pressures-in-Europe-559431)
- [Adilbish et al., 2025](https://www.imf.org/en/Publications/WP/Issues/2025/02/14/Europes-Productivity-Weakness-Firm-Level-Roots-and-Remedies-561771)
- [IMF, 2025](https://www.imf.org/en/News/Articles/2025/01/13/sp-integrating-the-eu-energy-market-to-foster-growth-and-resilience)
- [https://www.imf.org/en/home](https://www.imf.org/en/home)

_Source: https://www.imf.org/en/news/articles/2025/04/25/alfred-kammer-april-2025_