News
IMF Regional Outlook for Europe: A Recovery Short of Europe's Full Potential
29 October, 2024
Join us on November 13 at CERGE-EI to find out about the latest International Monetary Fund's Regional Economic Outlook for Europe!
Entitled "A Recovery Short of Europe's Full Potential", the IMF presentation will include two analytical notes:
Analytical Note 1: Europe’s Declining Productivity Growth: Diagnoses and Remedies
Europe’s widening per capita income gap with the U.S. primarily reflects a rising productivity shortfall with deep firm-level roots. Compared to the U.S., Europe’s large leading firms innovate and grow less, while young high growth firms have a smaller footprint in the economy. With these productivity growth engines being muted and unsuccessful firms exiting less than in the U.S., Europe also suffers an overabundance of stagnant mature firms. The note highlights the role of smaller markets and limited equity financing as bottlenecks holding back Europe’s large leading firms from scaling up and innovating. This is a particular concern in tech sectors, where Europe has been falling behind the most. As for young high-growth firms, the note underscores the importance of human capital to foster their formation and the need for a greater availability of risk capital to realize their potential. The note’s findings highlight the critical role of removing intra-Europe barriers to factor and product markets integration for improving business dynamism and reviving Europe’s productivity growth. This regional agenda needs to be complemented by domestic reforms that lower barriers to firm entry, facilitate exit, and remove tax and regulatory disincentives to grow.
Analytical Note 2: Accelerating Europe’s Income Convergence through Integration
Per capita income levels in Europe are on average a third lower than in the United States. Narrowing Europe’s income gap requires closing the productivity gap between the European and global frontier (REO note 1) and faster convergence within Europe (this REO note). The early 2000s demonstrate that convergence is possible. The prospect of joining the EU, followed by actual membership, put the necessary conditions in place: effective integration and structural reforms opened economies and improved their connectedness, benefitting both pre- and post-2004 enlargement member states (MS). Due to EU accession, average regional GDP per capita in new MS increased by around 30 percent after 15 years, with larger gains for poorer regions. Productivity catch-up, driven by innovation and higher educational attainment, along with substantial capital investment, primarily through FDI, contributed equally. More recently, momentum slowed and productivity levels across Europe flatlined. Further EU enlargement and deepening of the single market could unlock new sources of growth. Based on estimated effects of EU enlargement in this REO note, Europe’s income gap to the US could be reduced by up to 10 percentage points through a new enlargement round.
When: Wednesday 13 November, 2024 at 12:15
Where: CERGE-EI, Politických vězňů 7, Prague 1│Room 7, 2nd floor
To reserve a seat, please register here: https://forms.gle/9xAgkM9zJHGe34WW9
Speakers:
- Sebastian Weber is a Deputy Division Chief in the European Department of the IMF. His research interests include monetary policy, international macro and finance, development, and labor economics. Sebastian has been a consultant for the Organization for Economic Cooperation andDevelopment and the World Bank.
- Diego Cerdeiro is deputy chief in the regional studies unit of the IMF's European department. He has done research on international macroeconomics, international trade, financial contagion, and network theory.
The presentation will be held in English. It is a F2F event. We look forward to meeting you there!
