US, European economies diverge after pandemic as war rages

WASHINGTON — 

The U.S. system is showing resilience aft bouncing backmost from the COVID-19 pandemic but the eurozone's prospects are gloomier owed to caller crises and deeper problems, according to IMF forecasts released Tuesday.

In its latest World Economic Outlook report, the International Monetary Fund revised its 2025 eurozone maturation forecast down from 1.5% successful July to 1.2% arsenic challenges successful manufacturing bog down countries specified arsenic Germany.

In contrast, the world's biggest system is anticipated to turn 2.2% adjacent year.

The United States and eurozone person seen their paths diverge implicit the past 2 years, with the U.S. system logging 2.9% maturation successful 2023, importantly supra the eurozone's 0.4%, IMF figures show.

The money expects the U.S. system to grow by 2.8% successful 2024, again higher than the euro area's 0.8% maturation forecast.

This is due to the fact that "Europe has experienced 2 shocks, portion the United States has lone experienced one," EY main economist Gregory Daco told AFP.

After rebounding from the pandemic, which led to historical recessions astir the world, European countries took a deed from the effects of Russia's full-scale penetration of Ukraine successful February 2022.

This erstwhile again sharply raised vigor prices and snarled proviso chains successful the region, with the United States experiencing little of an interaction fixed its region from the struggle and greater vigor independence.

Germany stalls

In particular, the warfare has made a important interaction connected the eurozone's biggest system — Germany — which saw its system shrink successful 2023.

The German system is acceptable to spot nary maturation this year, lone expanding 0.8% successful 2025, said the IMF's latest report.

The 2025 fig was revised down from July's projection of 1.3% growth.

"Persistent weakness successful manufacturing weighs connected maturation for countries specified arsenic Germany and Italy," said the IMF.

Although Italy's home request is acceptable to payment from a European Union-financed betterment plan, "Germany is experiencing strain from fiscal consolidation and a crisp diminution successful existent property prices," the money said.

But it noted that "in the euro area, maturation seems to person reached its lowest constituent successful 2023."

France, the second-biggest EU economy, is projected to station humble maturation of 1.1% for this twelvemonth and the next.

US advantages

Daco of EY said the United States benefits from much favorable structural factors: "In presumption of its colonisation growth, concern complaint and productivity, it has maturation prospects that are treble those of Europe."

He pointed to a younger U.S. colonisation and greater competitiveness.

Other factors see Washington's enactment for households and businesses during the pandemic, which person helped to prop up consumption.

Funds from the government's CHIPS and Science Act arsenic good arsenic Inflation Reduction Act — to boost home semiconductor and cleanable vigor industries, respectively — are besides stimulating the economy, helium said.

Meanwhile, Europe is struggling to contend with these large initiatives.

A study by erstwhile European Central Bank President Mario Draghi, unveiled successful September, aims to bounds Europe's economical spread with the United States.

"It is important to swiftly travel up, with factual and ambitious structural policies, connected Mario Draghi's proposals for enhancing European competitiveness," said ECB President Christine Lagarde past Thursday.