European economies are facing a period of slower expansion and persistently high inflation in the near term, a view supported by IMF insights for Europe. Leading the IMF’s Europe Department, the director highlighted the contrast between energy price movements and the broader price pressures affecting households across the region. While energy costs have eased somewhat, other everyday expenses remain on an upward trajectory, pushing consumer prices higher on an ongoing basis. This pattern suggests that consumer price growth across developed European nations could average around the mid-fifties in percent for the year 2023.
The IMF projects a marked deceleration in growth for the developed economies of Europe. After expanding at roughly 3.6 percent in 2022, activity is expected to slow dramatically to around 0.7 percent in 2023. The outlook does not imply a stagnant trajectory, however, as expansion is anticipated to recover gradually. By 2024, growth is forecast to pick up to approximately 1.4 percent, signaling a modest but meaningful rebound as policy measures and global conditions adjust to evolving inflation dynamics.
The forecast also notes divergent performance among major economies within the G7 group. Within this cohort, the United Kingdom is anticipated to experience the weakest output performance in 2023 relative to its peers, a comparison that includes England, Germany, Italy, Canada, France, Japan, and the United States. This assessment reflects a combination of slowed domestic demand, shifting external trade patterns, and the ongoing challenges that some advanced economies face in balancing growth with inflation under a tight financial conditions environment.
Across Europe, inflation remains a central concern for policymakers and households alike. Inflationary pressures have shown persistence despite some easing in energy prices, underscoring the complex mix of factors shaping price dynamics. Food costs, housing services, and other household expenditures contribute to the higher price environment, even as energy markets exhibit periodic relief. The IMF emphasizes that these broad price trends have implications for real incomes, consumer confidence, and the effectiveness of policy responses in sustaining balanced growth over the medium term.
Policy implications from the IMF perspective stress the importance of calibrated, credible measures to support demand while curbing inflationary pressures. This includes a careful balance between monetary tightening or relief, depending on the evolving inflation outlook, and structural reforms aimed at improving productivity and competitiveness in the European economy. The overall message is that the path to sustainable growth in Europe will likely involve gradual progress, with attention to vulnerable sectors and regions that feel the impact of slower growth and higher prices more acutely. These insights reflect ongoing analysis of the European economy and are intended to help policymakers, investors, and households navigate the coming months with a clearer understanding of the risks and opportunities ahead.