The International Monetary Fund today warned of a number of potential risks to economic growth in the euro area, such as the trade war with the United States, as well as a “lack of progress” in Brexit negotiations. “The euro area economy is still in a good place,” the Washington-based IMF wrote in an annual report on the 19 countries that share the single currency. “Growth remains strong, broad-based, and job-friendly, even if there are signs that it has peaked.
At the same time, risks are rising, including escalating trade tensions and policy complacency among euro area countries,” the IMF warned. “Trade tensions have risen with the recent US imposition of tariffs on steel and aluminium imports.” And “time is running out on the Brexit negotiations with the lack of progress in raising the risk of a disruptive exit.” “The euro area is enjoying a strong expansion, despite the recent slowdown,” the IMF wrote.
Growth, powered essentially by interior demand, should reach 2.2 per cent in 2018 and 1.9 per cent in 2019, and then slow somewhat to 1.5 per cent in subsequent years. In a separate chapter on the economic impact of Britain’s looming exit from the EU, the IMF said that “integration between the EU and the United Kingdom has strengthened significantly over time, reflecting shared gains from the EU single market.
“It follows that the departure of the United Kingdom from the EU will represent a loss not only for the United Kingdom but also for the EU-27.” More open economies such as Belgium, the Netherlands and Ireland would feel the economic effects of Brexit the strongest, the IMF said. The loss in economic output for Ireland, in particular, could be as much as for Britain itself.