IMF Projects Steady Eurozone Growth Amidst Global Uncertainties

The International Monetary Fund (IMF) announced on Friday its expectation for the euro area's growth to remain moderate until 2027. Highlighting the economic landscape, the IMF pointed out that headline inflation is likely to stabilize at the 2% target by the second half of 2025, with core inflation anticipated to align with this target by 2026.

Challenges on the Horizon

Trade tensions and heightened uncertainty are identified as significant factors that could dampen economic activity. Despite potential boosts from increased defense and infrastructure spending, geopolitical issues pose a risk to both investment and consumption patterns.

Inflation Risks: A Dual Perspective

The IMF outlined a two-sided risk to the inflation outlook. On one side, risks of undershooting stem from low non-energy goods prices, weaker-than-expected activity and wages, and the recent appreciation of the euro. Conversely, inflation could surge due to factors such as increased fiscal spending, geopolitical tensions, supply chain disruptions, tariff escalations, and persistently high wage growth.