20230718-IMF-Euro_Area_Policies_2023_Article_IV_Consultation-Press_Release_Staff_Report_and_Statement_by_the_Executive_Director_for_Euro_Area_IMF_Country_Report_No._23_264_103页_1mb

The euro area economy showed notable resilience amid the energy crisis and inflation triggered by the Ukraine conflict, supported by nimble policy responses. Growth weakened in early 2023, slipping into mild technical recession, but is expected to gradually recover through 2023-2024. Inflation, while easing from record highs, remains well above the 2% target due to persistent core inflation and supply disruptions, necessitating further monetary policy tightening.

The Staff Report highlights a large fiscal deficit and high public debt, emphasizing the need for fiscal consolidation with a flexible, risk-based approach aligned with medium-term fiscal plans. The outlook remains uncertain, with risks tilted to the downside for growth but slightly less for inflation than previously. Key policy discussions include continued monetary tightening led by the ECB, further fiscal measures to rebuild policy space, completing the EU's financial architecture, enhancing resilience for the green transition, and maintaining an open, rules-based trade policy.

The Executive Board broadly agrees with the Staff Report's assessment, underscoring the need for coordinated policy actions to guide inflation back to target while preserving financial stability, and advancing structural reforms and investments to raise potential growth.