UPDATE: International Monetary Fund (IMF) Upgrades Eurozone Growth Forecast To 5% Compared To 4.6% Projected In July

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In Europe, France is expected to perform better than initially expected

The International Monetary Fund on Tuesday raised its forecast for eurozone economic growth in 2021 as France and Italy put in better-than-expected performances and pandemic restrictions eased.

In a report published as the IMF and World Bank hold their biannual meetings, the Fund said it now expects growth of five percent for the single currency area, compared to just 4.6 percent in its previous forecast in July.

“The euro area, after a really tough first quarter due mainly to the pandemic, has bounced back really strongly as our health restrictions have changed,” said Paschal Donohoe, president of the Eurogroup of eurozone finance ministers who took part in the meetings.

“We will see a return to pre-pandemic levels by the end of the year.” The IMF also sought to ease concerns about inflation, which is being closely monitored by markets waiting to see when the European Central Bank will wind down its economic stimulus measures.

It said it expected consumer prices to fall back to pre-pandemic levels by the middle of next year. The eurozone growth forecast stands in stark contrast to other major economies for which the IMF downgraded its outlook on Tuesday.

It predicted six percent growth in the United States, down one point. Output is now forecast at eight percent in China and 6.8 percent in the United Kingdom, both slightly lower than previously thought.

In Europe, though, France is expected to perform better than initially expected, with 6.3 percent growth after a recession in 2020.

On Monday, the French government itself revised expectations for the year to 6.25 percent, following the success of the Covid inoculation campaign and the introduction of a health pass that had little impact on economic activity.

Italy is also expected to see better-than-expected growth at 5.8 percent. Germany, however, saw its 2021 growth downgraded to 3.1 percent due to shortfalls in supplies affecting the industrial sector.

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