IMF optimistic on euro zone growth but cuts UK’s GDP forecast

LONDON: The International Monetary Fund (IMF) is more optimistic about the economy of the 19-country euro zone after a run of elections saw populist politicians defeated.
But it revised down its 2017 growth forecast for the British economy following a weak first quarter that suggested the country’s exit from the EU was starting to weigh on consumers and businesses.
In an update to its April projections published Monday, the IMF revised up its growth forecasts for many euro zone countries, including the big four of Germany, France, Italy and Spain, after stronger-than-anticipated first-quarter figures.
Germany, Europe’s biggest economy, is projected to grow by 1.8 percent, up 0.2 percentage point on the previous estimate, while France is forecast to expand 1.5 percent, up 0.1 percentage point.
Projections for Italy and Spain have been revised higher by a substantial 0.5 percentage point. The two are now expected to grow by 1.3 percent and 3.1 percent, respectively. All four are also expected to grow by more than anticipated in 2018.
Overall, the IMF expects the euro zone to expand by 1.9 percent this year, 0.2 percentage point more than its previous projection.
That is just shy of the IMF’s 2.1 percent forecast for the US but slightly ahead of Britain’s, whose projected growth rate was revised down by 0.3 percentage point to 1.7 percent following a weak first quarter that raised concerns about the country’s economy ahead of its exit from the EU.
The IMF’s slew of upgrades comes amid rising confidence in the euro zone’s outlook following a series of elections that saw populist politicians defeated, most notably in France, where Emmanuel Macron defeated the far-right candidate Marine Le Pen in May’s presidential election.
“On the upside, the cyclical rebound could be stronger and more sustained in Europe, where political risk has diminished,” the IMF said in a statement accompanying its new forecasts.
The IMF’s update came as a survey pointed to a modest slowdown in the euro zone in July as the region struggled to keep up the fast pace of its recent upturn.
Financial information firm IHS Markit said Monday that its purchasing managers’ index for the region fell to a six-month low of 55.8 points in July from 56.3 the previous month.