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Flat growth if not recession for France, Germany, UK and Italy: War deadlocks major European economies in first half of 2022. Only Spain is saved. That said the head of the European department of the IMF, Alfred Kammer, yesterday.
quarters of no growth
The continent’s major countries “are expected to grow very little or even shrink for two consecutive quarters” this year. In the press conference presenting the IMF’s outlook on Europe, Kammer specified that “all major European economies, with the exception of Spain, will see growth around zero for a couple of quarters. Some countries will be slightly above, others slightly below ». However, Kammer left open which of these could lead to a technical recession (“there is too much uncertainty”) and limited himself to pointing out the “risk”.
Italy’s GDP falls to 2.3% in 2022
The setback is therefore likely to be temporary, but will have a significant impact. For Italy, the Monetary Fund estimates GDP will increase by 2.3% in 2022, down 1.5 points from January forecasts. 2023 is also slowing down when GDP will grow by 1.7%, which is half a point less. Confindustria’s research department has estimated a fall of 0.2% for the first quarter of 2022 and 0.5% for the second, a technical recession followed by a recovery that would bring growth to 1.9% for the full year .
Eurozone estimates are down
Earlier in the week, the IMF cut the euro-zone growth forecast for 2022 by 1.1 points to 2.8% compared to January estimates. In 2023, GDP will increase by 0.2% less and growth will end at 2.3%. Significant reduction also for Germany, which leaves 1.7 points in 2022 (the increase stops at 2.1%). In 2023, however, GDP will increase by 0.2% more than assumed. For its part, the German government is preparing to lower its forecasts for 2022 to 2.2%, Spain also loses a growth point, but its GDP will still grow by 4.8% this year according to the IMF. Based on the current situation with inflationary pressures fueled by the war, the ECB should “continue to normalize monetary policy,” according to the IMF. The economic policy instruments in the hands of the governments are “more suitable” than those of the central banks to deal with the upcoming shocks. Automatic stabilizers are needed, including through deficit increases, to ensure support for refugees, vulnerable families and businesses. By being very careful not to start the spiral between prices and wages.
The unknown of the embargo
In the event of a total embargo on energy exports from Russia, the scenario would be much worse: the IMF estimates that eurozone GDP in 2023 would be 3% below the baseline (with sanctions currently in place). The impact would be all the more severe for the countries most dependent on Moscow: the gas freeze could reduce German GDP by less than 1% to more than 6% annually, again compared to the current scenario. According to the Bundesbank, the German economy risks contracting by almost 2% this year in the event of a total Russian energy embargo.