IMF raises eurozone growth forecast, sees German recession

WASHINGTON: The IMF on Tuesday slightly raised its forecast for economic growth in the eurozone this year but it expects a shallow recession in powerhouse Germany.

The economy of the 20-nation single currency area will expand by 0.8 percent, better than the 0.7 percent growth estimated in January, the International Monetary Fund said.

The IMF, however, expects Europe’s biggest economy, Germany, to shrink by 0.1 percent, a reversal from the slight growth it had forecast in its previous update to the World Economic Outlook in January.

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The Washington-based institution’s new forecast contradicts official and expert estimates in Germany which now see the country dodging recession this year.

The German economy ministry has forecast 0.2 percent growth after previously expecting a contraction due to the energy crisis that was sparked by Russia’s invasion of Ukraine.

But oil and gas prices have eased in recent months after soaring last year.

A 200-billion-euro government relief package, including a cap on gas and electricity prices, combined with mild winter weather and efforts to diversify gas supplies have helped Germany’s economy cope better than expected.

Spain’s economy is performing better, with the IMF forecasting 1.5 percent growth, up from 1.1 percent in its previous outlook.

France, the eurozone’s second biggest economy, is still expected to see 0.7 percent growth, the same as Italy, whose outlook was slightly upgraded.

Outside the European Union, Britain’s economy is expected to shrink by 0.3 percent as the country battles a cost-of-living crisis, but the forecast is an upgrade from the previous IMF estimate of a 0.6 percent contraction.

The IMF’s World Economic Outlook foresees 2.8 percent growth for the global economy, down from 2.9 percent in its previous report after sharp downward revisions for Japan and emerging markets.

The eurozone’s growth outlook for 2024 was downgraded to 1.4 percent compared to 1.6 percent previously.