IMF Warns of Risk of Stagnation in European Economy

The International Monetary Fund (IMF) has warned of the threat of stagnation in the European economy due to trade conflicts and low domestic demand.

The IMF’s April forecast for the eurozone economy provides for growth of only 0.8% this year, and the risks to this forecast are heavily skewed to the negative side, the fund said in a statement.

The IMF called on European authorities to take urgent and decisive measures to support economic growth and investment. In particular, an important measure will be strengthening the EU single market, since fragmentation within Europe harms innovation and business.

According to the fund’s estimates, internal barriers between EU countries are equivalent to a 44% duty on goods and a 110% tariff on services. Removing these barriers through unification of regulatory requirements, capital market reform and improved labor mobility will increase EU GDP by about 3% over 10 years.

The IMF also described Europe’s financial sector as “adequately capitalized” and with sufficient liquidity. At the same time, the fund expressed concern about potential threats to financial stability from non-bank financial institutions.