Brussels (Brussels Morning) The International Monetary Fund (IMF) warns that new restrictions jeopardise the eurozone’s economic recovery, CNBC reported yesterday, Monday.
In its final 2020 report on the eurozone, the IMF predicts that growth in the monetary union in the coming period will be lower than anticipated unless the epidemiological situation in Europe changes significantly in coming months.
The Fund notes that the second wave of coronavirus infections and the associated restrictions to curb the spread of the virus jeopardise economic recovery in the eurozone as confidence and mobility drop. It predicts that additional fiscal and monetary support will be needed to help the eurozone recover from the negative effects of the coronavirus crisis.
Besides warning that continuation of negative epidemiological trends can jeopardise economic growth in the final quarter of this year, the IMF notes that a prolonged health crisis would lead to lower growth in the first quarter of 2021 than was predicted in October. The Fund points out that a lengthy crisis would increase vulnerabilities within the public and private sectors as well as exacerbate poverty and inequality.
Commenting on the EU’s stimulus package worth some 750 billion euro, the IMF stressed the importance of approving the measure and distributing the funds as soon as possible, since delays would jeopardise recovery prospects. It predicted that additional funding injections would be needed from the European Central Bank.
The IMF expects that national stimulus measures will have to provide wide-ranging support for a longer period than was originally expected due to the second wave of infections. It notes that the absence of a trade agreement between the EU and the UK adds to the uncertainty, and that the possible escalation of trade tensions between Britain and the bloc does not help.
Dominic Raab, the UK Secretary of State for Foreign, Commonwealth and Development Affairs, noted on Sunday that negotiations between the UK and the EU are in their final stages, with just weeks to approve an agreement.
The IMF has indicated that recent positive news from pharmaceutical giants about coronavirus vaccines warrants some optimism about economic recovery.