« Back to AP Headlines
Jul 24, 11:23 AM EDT

IMF warms to eurozone economy amid lower political risks


AP Photo
AP Photo/Andrew Medichini

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
IMF warms to eurozone economy amid lower political risks

IMF upgrades eurozone, Japan; leaves world outlook unchanged

Eurozone growth projections revised up by the IMF

IMF cuts British growth forecast after weak first quarter

Spanish minister revises 2017 growth forecast to 3.2 percent

The Latest: ECB chief says patience needed with stimulus

The Latest: Draghi says eurozone still needs stimulus

ADB: Rise in exports boost developing Asia's growth outlook

Bank of Japan keeps stimulus intact, cuts inflation outlook

Game of Thrones: Shame Cersei, you lost your food supply

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

LONDON (AP) -- The International Monetary is more optimistic about the economy of the 19-country eurozone after a run of elections saw populist politicians defeated and risks to its outlook abated.

In an update to its April projections published Monday, the IMF revised up its growth forecasts for many eurozone countries, including the big four of Germany, France, Italy and Spain, after stronger than anticipated first quarter figures.

Germany, Europe's biggest economy, is projected to grow by 1.8 percent, up 0.2 percentage point on the previous estimate, while France is forecast to expand 1.5 percent, up 0.1 percentage point. Projections for Italy and Spain have been revised higher by a substantial 0.5 percentage point. The two are now expected to grow by 1.3 percent and 3.1 percent, respectively. All four are also expected to grow by more than anticipated in 2018.

Overall, the IMF expects the eurozone to expand by 1.9 percent this year, 0.2 percentage point more than its previous projection. That's just shy of the IMF's 2.1 percent forecast for the U.S., which was trimmed by 0.2 percentage point. However, it's slightly ahead of Britain's, whose projected growth was revised down 0.3 percentage point to 1.7 percent following a weak first quarter that raised concerns about the country's economy ahead of its exit from the European Union.

The IMF's eurozone upgrades come amid rising confidence in the bloc following a series of elections that saw populist politicians defeated, most notably in France, where Emmanuel Macron defeated the far-right candidate Marine Le Pen in May's presidential election.

At the start of the year, political risks were considered the major hurdle facing the eurozone. There had been fears that radical changes in government could have seen more insular economic policies and further questions over the future of the euro itself.

"On the upside, the cyclical rebound could be stronger and more sustained in Europe, where political risk has diminished," the IMF said in Monday's report.

The lead eurozone economist at Oxford Economics, Ben May, thinks the IMF's forecast may actually turn out to be too cautious. He's predicting 2.2 percent growth as the region benefits from lower inflation, healthy global growth and a pick-up in business investment.

The IMF's update came as a survey showed the eurozone economy slowed in July from a fast pace.

Financial information firm IHS Markit said Monday that its purchasing managers' index for the region fell to a six-month low of 55.8 points in July from 56.3 the previous month.

The indicator still points to one of the strongest economic expansions in the past six years, with quarterly growth at a still-healthy 0.6 percent, down only slightly from the 0.7 percent signaled for the second quarter. Official second-quarter figures are due in early August.

Chris Williamson, the firm's chief business economist, says it's probably just a "speed bump," with the economy "hitting bottlenecks due to the speed of the recent upturn."

He noted that forward-looking indicators, such as new order inflows, suggest robust growth. As a result, job creation is "booming" as companies expand to meet demand.

The survey is likely to inform the ECB's deliberations as it mulls when to start reining back its monetary stimulus. Last week, ECB President Mario Draghi sought to be neutral, worried that any indication of any change of course could cause the euro to surge. More clarity is expected at the next policy meeting on Sept. 7.

Much will depend on inflation. The chief purpose behind the ECB's stimulus efforts, which has involved slashing interest rates and buying 60 billion euros ($69 billion) a month in bonds at least through the end of the year, is to get inflation up to its goal of just below 2 percent. In June, the annual rate of inflation was 1.3 percent.

Monday's survey suggested that inflation pressures eased in July, which may reinforce Draghi's belief that there isn't "any convincing sign of a pickup in inflation."

© 2017 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.