IMF: soft landing achievable in Europe but challenges not easy

Rome, 19 April. (askanews) – For European economies, a “soft landing”, to be understood as the return of inflation to target levels with a modest sacrifice in terms of economic growth, is “achievable”, however “crosswinds could make it difficult to restore price stability while seeking to ensure a lasting recovery.” This was stated by the International Monetary Fund in the report on the economy of Europe, published today on the occasion of the spring meetings in Washington. In the coming quarters, the moderation of still strong labor markets should support the growth of real incomes and consumption. The recovery in consumption in turn will help to counteract the effects of the necessary withdrawal of support measures against high energy prices and to support investments, while monetary policies should loosen.

Faced with this context, according to the IMF, a gradual strengthening of private demand and the disinflationary process will require a strengthening of productivity, while company margins should return to pre-crisis values. In advanced economies the risks of a soft landing are “balanced”. However, this is not the only task that requires attention, the study continues. In Europe, in fact, per capita income levels are slow and lag behind the values ​​recorded in the leading countries on a global scale. And this gap is not expected to close in the foreseeable horizon. Productivity growth has slowed and the aging population represents a burden. More generally, geopolitical fragmentation on the continent is casting shadows on old growth models. Meanwhile, the long-term pressures on spending due to the aging of populations, the ambitions for climate action and the relaunch of those on defense spending require reforms structural factors that add pressure to the issue of growth sustainability. According to the IMF, “meeting these challenges will not be easy. However, Europe has already demonstrated that it can overcome even the most difficult obstacles when it acts in a determined and united manner. With the right policies – says the IMF – policy makers can ensure a soft landing and boost long-term growth prospects.”