The IMF stated that due to the aging labor force in Europe, further decline in birth rates, low levels of corporate investment, insufficient cross-border activities, and productivity far below that of the United States, the annual GDP growth rate in Europe is expected to decrease to 1.45% over the decade ending in 2029, while the United States is expected to have an annual GDP growth rate of 2.29% during the same period
The International Monetary Fund (IMF) has sounded the alarm for the slowing European economy.
On Thursday, October 24th, in the latest European economic outlook, the IMF warned that the gap between the European economy and the United States will further widen by 2030.
The IMF stated that due to the aging labor force in Europe, further decline in birth rates, low levels of corporate investment, insufficient cross-border activities, and productivity far below that of the United States, the annual GDP growth rate in Europe is projected to decrease to 1.45% by 2029. In contrast, the United States is expected to have an annual GDP growth rate of 2.29% during the same period—especially since the global financial crisis and particularly after the COVID-19 pandemic, the U.S. economy has consistently outpaced Europe.
The IMF pointed out that Europe's technological productivity has remained almost stagnant since 2005, while the United States has grown by nearly 40% during the same period; Europe's venture capital scale is only a quarter of that of the United States, which is also one of the reasons for the lack of business vitality in Europe; furthermore, in Europe, companies established within five years or less only hold "about half the market share of the United States."
Former President of the European Central Bank, Mario Draghi, released a report in September calling for the EU to increase investment, enhance competitiveness, and urged Europe to take more measures to integrate the regional economy. The IMF also stated in this report:
"To realize Europe's full growth potential, a larger, more integrated single market is needed, especially in goods, services, and capital."
However, Alfred Kammer, Director of the IMF's European Department, stated that achieving further integration is challenging, as some countries and vested interest groups are hindering this process.
Kammer pointed out that Europe faces some "fundamental" issues that can be traced back decades. In 2000, the per capita GDP adjusted for purchasing power parity in Germany, France, Italy, and Spain was the same as that of the United States, but now, the per capita income in these four European countries is about 20% lower than that of the United States. In a recent interview with the Financial Times, Kammer said:
"Over the next twenty-five years, we have seen a growing gap—a significant gap that did not exist before but now does."
Kammer added that the pandemic has exacerbated the gap in economic growth between the United States and Europe: in the twenty years leading up to 2019, the average growth rate in Europe is expected to decrease by 0.6 percentage points, while the growth outlook for the United States in the decade leading up to 2029 has slightly increased compared to the previous decades