Europe | Doubts about recovery

Summary

The International Monetary Fund (IMF) has recently published its updated global forecast with an upward revision that reflects moderate optimism for this year, plagued by geopolitical uncertainties.

Key points

• Key points:
• It notes that the economy is holding up better than expected in the US and many emerging economies, and inflation is moderating faster than expected.
• It revises global growth upward in 2024 from 2.9% to 3.1% (no small change in just three months) and leaves it unchanged at 3.2% for 2025.
• The Fund's forecast accurately reflects the soft landing that is taking place in the US economy and the measures that China is implementing to mitigate its slowdown, which is more structural than conjunctural.
• For the eurozone, however, the picture looks bleaker, in line with the indicators we have been observing recently. The IMF has revised downward its growth forecast for the year as a whole by three tenths of a percentage point, but still leaving it at 0.9%, which is above BBVA Research's scenario (0.7%).
• Moreover, the European economy faces several challenges. On inflation, there is still the final stretch to get to the target, and core inflation is still high. Moreover, the ECB is waiting for wage, profit and commodity risks not to materialize before initiating the expected interest rate cut, which could delay the recovery somewhat. Finally, the implementation of the tax rules will imply an as yet uncertain adjustment that will affect growth in 2025.

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