Alert of uncertainty in the Eurozone economy from the IMF

International Monetary Fund (IMF) President Kristalina Georgieva said there are downside risks to growth and upside risks to inflation in the euro zone and uncertainty remains high.

Georgieva made statements to the press after the Eurogroup meeting in Luxembourg.

Noting that the eurozone economy has shown resilience despite significant trade losses from the Russia-Ukraine war, Georgieva said the eurozone economy entered a mild technical recession in early 2023 and economic activity only will gradually recover.

Georgieva said that inflation has started to decline from historically high levels, but is still well above target.

“Uncertainty remains high in the euro area, as risks are on the downside for growth and upside for inflation.” Georgieva stressed that the short-term policy priority is to bring inflation back to target while maintaining financial stability.

TIGHT MONETARY POLICY Emphasis

Noting the importance of continuing tight monetary policies to keep inflation expectations low, Georgieva said:

“Current economic conditions call for a tight fiscal policy stance in the 2023-2024 period, which will reduce overall demand, reduce upward pressure on interest rates, and thus help reduce the risk of disruptions to markets. financial markets.

On the financial stability side, although the banking system seems generally resilient, the tightening of financial conditions may reveal vulnerabilities. Supervisors should continue to assess banks’ exposure to interest rate, financing, liquidity and credit risks, including those related to real estate.

Underlining the importance of strengthening the financial structure, strict implementation of the Basel III criteria and progress in the banking and capital markets union to ensure financial stability in the euro area, Georgieva said that EU countries they should also take swift action on the prepared governance reform. to make its public debt sustainable. (AA)