IMF staff concludes 2023 mission on common policies for Member Countries

The euro area economy has shown remarkable resilience in the aftermath of Russia’s invasion of Ukraine and the largest terms of trade shock in several decades, thanks to a strong policy response. However, economic activity has weakened, and inflation – although gradually declining – remains elevated. Monetary policy must continue to tighten to bring inflation to target on time. 

According to IMF, the growth in the euro area is likely to pick up gradually following a significant weakening. The 2022 growth outturn exceeded the initial post-invasion projections, thanks to a swift policy response and a strong rebound in contact-intensive services. Activity nevertheless weakened considerably in the second half of the year and slipped into a mild technical recession in early 2023 as financial conditions tightened, real wages dropped, and consumer confidence plummeted following the spike in energy prices. 

(WBJ)