IMF sees Europe’s slowdown in line with expectations

THE International Monetary Fund sees Europe’s economy weakening in line with forecasts, as the services sector is set to follow a softening in manufacturing.

Alfred Kammer, the IMF’s European director, told Bloomberg’s Future of Finance conference in Frankfurt that “sluggish growth” in the region is in line with what his institution had been expecting. Manufacturing output is slowing and services are set to follow, he said.

Oscar Arce, the European Central Bank’s director general for economics and research, hit a similar note, saying that services are now losing momentum and manufacturers already are “very, very weak.”

As Germany risks becoming a laggard in Europe again, top policymakers and executives are gathered at the annual event to discuss the challenges.

The rapid shift away from Russian fossil fuels, fragmentations in global trade and an ageing society have sparked a debate about whether Europe’s largest economy is again facing a period of underperformance. 

“Inflation is the No 1 problem that needs to be brought under control,” the IMF’s Kammer said.

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Inflation in the euro area has almost halved from a record 10.6 per cent in October, but still is above 5 per cent, more than twice the ECB’s target. BLOOMBERG