BRUSSELS: The IMF hiked its eurozone growth forecasts Tuesday, with the economy getting a boost from lower oil prices, record low interest rates and the European Central Bank’s massive stimulus programme.
At the same time, the IMF warned that the outlook was uncertain, with very low inflation reflecting weak demand while the Ukraine crisis and uncertainty over twice-bailed out Greece’s future in the 19-nation single currency bloc were cause for concern.
The eurozone should grow 1.5 percent this year, up from the 1.2 percent estimated in January, the International Monetary Fund said in its latest World Economic Outlook survey.
For 2016, the IMF put eurozone growth at 1.6 percent, up from 1.4 percent.
The economy grew 0.9 percent in 2014, picking up in the last few months of the year after a soft patch which had stoked fears of deflation — when prices fall outright as consumers delay purchases in the hope of buying cheaper, which in turn dampens demand and undercuts activity.
Consumer prices are expected to edge up by a minimal 0.1 percent this year and a still historically low 1.0 percent in 2016, the IMF said.
“There are signs of a pickup and some positive momentum in the euro area, reflecting lower oil prices and supportive financial conditions but risks of prolonged low growth and low inflation remain.”
“The priority is to boost growth and inflation through a comprehensive approach,” the report said, citing the ECB’s stimulus measures, changes in tax policy to favour investment, structural reforms and strengthening the banks to put the economy back on track after the upheavals of the debt crisis.